Buyback stock, issue dividend or buy Bitcoin – MicroStrategy adds to the Treasury game plan

Here are the things that Corporate Treasury managers normally think about

  • Cash.
  • Short term US Treasury Bonds and other “cash equivalents”.
  • Using that cash to buy back company stock in order to raise the stock price.
  • Using that cash to issue dividends in order to raise the stock price.

Here is what Corporate Treasury managers do NOT normally think about:

  • Bitcoin.

Michael Saylor, Chairman and CEO of  MicroStrategy, is changing this thinking. The fact that he calls the shots (as founder and principal shareholder) helps him to think and execute outside the box. He has bet $1.1 billion on Bitcoin, having recently completed the sale of a $650 million convertible note to fund further purchases.

Eeyore, our resident cynic/pessimist/reality checker was heard muttering “don’t be so naive Tigger, he is just using the Bitcoin hype to drive up his stock price. MSTR (stock symbol for MicroStrategy) has been totally dead money until he started doing this”.

During the Pooh Corner Debate on Bitcoin (held in Hotel Decentral), Pooh Bear, the famously wise “bear of little brain” responded with “that may be true Eeyore my old friend, but it has surely worked. Looked at that 5 year price chart. More than  doubling his stock price means he can probably buy as much honey as he wants”.

 

Of course it will take a while for the financial reporting to catch up. Total cash shown for MSTR is only $52m. Where is all that Bitcoin? It is hard to find, it is probably under something like “other investments”, but investors can see that MicroStrategy’s investment in Bitcoin has paid off handsomely. I do not know how well their core business is doing, but I am motivated to find out. It could be that MSTR like OSTK is being used as a substitute for buying bitcoin directly.

Bitcoin is wildly speculative, but when the alternative is negative interest rates, even conservative financial folk will take a serious  look.

Bernard Lunn is Editor and CEO of Daily Fintech and author of The Blockchain Economy

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

    

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.