Digital Assets: Nasdaq-listed Company Microstrategy Bets $250M on Bitcoin

August 12, 2020 | Digital Assets, News
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Bitcoin (BTC) is a better store of value than cash, the company says.

MicroStrategy Inc (NASDAQ: MSTR), a business intelligence firm, announced Tuesday that it had made good on its two-pronged capital allocation strategy announced July 2020. Firstly, it launched a tender offer to buy up $250 million worth of its class A common stock.

In the second leg, it bought bitcoin (BTC) worth $250 million. This was a part of its commitment to invest in one or more alternative investments or assets. (Bitcoin.com)

Maximizing value for shareholders

The company said in a statement that its new capital allocation strategy sought to maximize shareholder value.

“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash,” said Michael J. Saylor, CEO, Microstrategy.

Given this view, the company decided to make BTC the principal holding in its treasury reserve strategy.

Risks to the company’s treasury program

MicroStrategy clarified that traditional assets posed a threat to its treasury program – a conclusion it reached after months of deliberation.

Macro risk factors included the fallout from the COVID-19 pandemic, the fiscal stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty.

The company warned that these factors “may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”

Why Bitcoin

In a major plug for the cryptocurrency, MicroStrategy said bitcoin was as good as digital gold. It was “harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”

“MicroStrategy believes that buying $250 million in Bitcoin will provide it the opportunity to earn better returns and preserve the value of our capital over time compared to holding cash,” added Phong Le, President & CFO.

Bitcoin community welcomes the decision

Microstrategy consummated the decision by purchasing 21,454 bitcoins at an aggregate purchase price of $250 million.

The BTC community said the investment showed the growing institutional adoption of crypto.

One heavyweight to welcome the move was Barry Silbert, CEO of crypto investment giant Grayscale:

“MicroStrategy, a $1.2 billion company, just turned itself into a publicly-traded bitcoin play. Smart.”

Related Story:      Fidelity Report Says Institutional Adoption of Crypto Gaining Traction                                             

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