Software business-turned-bitcoin hoarder MicroStrategy is inspiring a host of companies to buy the cryptocurrency and hold it in their corporate treasuries, in a manoeuvre aimed at boosting their flagging share prices.
Pharmaceutical companies and advertisers are among 78 listed companies around the world that are following the US group’s example in buying the coins to hold in place of cash, according to data from crypto security company Coinkite.
MicroStrategy’s founder Michael Saylor has made bitcoin his company’s primary treasury reserve with an aggressive buying spree since 2020. Saylor believes bitcoin’s value will keep rising, saying: “We are going to Mars.”
Having strapped its share price to the fortunes of bitcoin, MicroStrategy is now the world’s largest corporate holder.
In the past six months its share price gains have even outstripped those of the cryptocurrency, and its $87bn market capitalisation is nearly double the value of its bitcoin holdings. It also had $46mn in cash and cash equivalents at the end of September.
“Success breeds imitators,” said Mark Palmer, senior equity research analyst at research and investment banking firm The Benchmark Company.
“Companies that have seen their stock struggle . . . often because their business models are not particularly compelling in the eyes of many investors, they have opted to follow MicroStrategy’s lead,” he said.
This year bitcoin hit a record high above $109,000 as traders celebrated US President Donald Trump’s promise to make the US the world’s bitcoin superpower.
In an executive order in January, he set up a working group to evaluate creating a national digital assets stockpile, while the US securities regulator has made it easier for financial institutions to custody crypto tokens.
Saylor too has accelerated his company’s bitcoin purchases and in November laid out an ambitious three-year goal to raise $42bn in debt and equity to fund more buying.
KULR Technology, a US small cap stock whose thermal energy management products are used by Nasa and the US Navy, said in December it would follow MicroStrategy’s model.
“It is definitely a Michael Saylor inspiration,” said Michael Mo, chief executive of KULR. “I had a conversation with my board and we jumped into the bitcoin treasury reserve strategy in parallel with our operating business.”
Mo, who plans to spend up to 90 per cent of the company’s surplus cash on buying bitcoin, said he believes in “the bitcoin philosophy”.
While some shareholders questioned if the new policy would distract from the company’s main business, it also helped bring in a new set of crypto-friendly investors, he said.
KULR has since bought 510 bitcoin, equivalent to about $51mn. Its shares, which had languished over the past year or so, had almost quadrupled by late December, and are still up around 50 per cent since it said it would buy the coins.
Some, like MicroStrategy, are tapping investors for funds with the intention of buying bitcoin. This week, chronic disease detection company Semler Scientific said it had bought 871 bitcoins for $88.5mn using a convertible bond issued in January, and after monetising an investment. Its shares have soared around 120 per cent since adopting the cryptocurrency as its “primary treasury asset”.
Japanese company Metaplanet — dubbed “Asia’s MicroStrategy” — last year switched from developing hotels into becoming a “bitcoin treasury company” and has been rewarded with a more than 2,000 per cent share price rise. Last month it announced plans to raise ¥116bn ($750mn) in new shares in order to add to the 1,762 bitcoins it holds.
Others see buying bitcoin as an opportunity to navigate more pressing issues. OneMedNet, a microcap US healthcare data company, began buying bitcoin last July to fight back against what it saw as short sellers depressing its stock.
“Normally the way you defend against [short sellers] is increasing revenue, which we’re very actively in the process of doing,” said Jeffrey Yu, founder of OneMedNet. However, bitcoin “has potentially unlimited upside and is another tool [to increase revenue]”, he added. The company’s share price has risen around 20 per cent since it began its purchases last summer.
To raise the funds for the purchases, OneMedNet raised $4.6mn in a private placement.
“Bitcoin is like kryptonite for the short sellers,” said Brian Estes, chief investment officer at Off The Chain Capital, an investment manager which participated in the placement. “[You can] scare out the shorts with bitcoin.”
Saylor is a prominent driver in encouraging other companies to follow his lead, even running a Bitcoin for Corporations conference — and invited Mo to his New Year’s eve party in Miami.
Several asset managers, including Bitwise, have lodged applications with US regulators for permission to launch stock market funds that track companies with big bitcoin treasury holdings.
Companies holding the coins are also benefiting from a change to US accounting rules. The Financial Accounting Standards Board said that bitcoin should be measured at fair market value on a company’s balance sheet and counted as net income.
Carmaker Tesla, a longtime bitcoin holder, last month reported a $600mn mark-to-market income boost from the token under the new standards.
“That mark-up flows through your income statement and . . . could boost your earnings per share if it goes up,” said Estes, who is “actively knocking on doors” to find other companies willing to take investments in order to buy bitcoin.
But making bitcoin a primary treasury asset changes the nature of the company, said The Benchmark Company’s Palmer. “Zombie companies” using bitcoin to prop up their share prices mean “a company’s operating business is effectively a facilitator of the bitcoin acquisition strategy”, he said.
The strategy also relies on bitcoin retaining its value. If it crashes, executives admit the fallout could be destabilising.
“It is definitely a volatile asset,” Mo admitted. He added that holding US Treasuries is “definitely safer”, but, given that his firm is not using debt to buy bitcoin, “I think that we’re structuring our treasury strategy such that we can withstand this kind of volatility.”
Interested in Cryptocurrencies?
Visit our Digital Assets dashboard to keep up with developments in the cryptocurrency market. Explore and analyse data on major cryptocurrencies and the market as a whole.
Click here to visit Digital Assets dashboard
