Since the US listed company MicroStrategy introduced Bitcoin as a corporate asset reserve and achieved great success, more and more companies have adopted the same strategy. What is the performance of these companies buying Bitcoin? How should investors assess the value of these companies?
Bitcoin development company MicroStrategy
MicroStrategy holds the largest number of Bitcoins among all listed companies. Since it entered the Bitcoin market in 2020, the company has continued to buy Bitcoins using its own cash, debt issuance and new shares, and it now owns 244,800 Bitcoins. MicroStrategy rebranded itself in February this year, positioning itself as a “Bitcoin development company.” Its founder, Michael Saylor, is the best Bitcoin Hodler spokesperson. Saylor believes that the strategy of buying Bitcoin can enhance the company's reputation, and the increase in the company's software revenue will enable the micro-strategy to buy more Bitcoins, which is a benign cycle, and emphasized that "continuously buying Bitcoin is an exit strategy." In his eyes, the only way is to continuously buy and hold Bitcoin.
(Michael Saylor, founder of MicroStrategy: Continuously buying Bitcoin is an exit strategy)
What does the "Bitcoin rate of return" of micro-strategy represent?
MicroStrategy has introduced a new key performance indicator "Bitcoin Yield" for its Bitcoin strategy. Its “Bitcoin Yield” is 17% so far this year, and it aims to grow 4% to 8% annually over the next three years.
In order to facilitate the understanding of "Bitcoin Return", we combine the number of Bitcoins held by the micro-strategy since the end of 2020, the number of diluted outstanding shares of the micro-strategy (all actual shares of common stock and all convertible notes through conversion, Any additional shares resulting from the exercise of all stock options and the settlement of all restricted and performance stock units are included in the calculation of the number of Bitcoins it holds per share. We can see that its value increased from 0.00566 at the end of 2020 to 0.01066 on 2024/9/12. In other words, if you bought one share of MicroStrategy’s stock price at the end of 2020, the number of Bitcoins you held would have almost doubled (an increase of nearly 90%).
The "Bitcoin rate of return" used by MicroStrategy does not take into account the price fluctuations of Bitcoin. It is purely considered from the perspective of MicroStrategy's shareholders. MicroStrategy believes that this KPI can be used to supplement investors' interest in the return of Bitcoin through the issuance of additional ordinary shares or convertible It is a tool for common stocks to help investors understand and make decisions about buying Bitcoin. In its last financial report, MicroStrategy said it aimed to grow at 4% to 8% per year over the next three years. In other words, the amount of Bitcoin held by micro-strategy shareholders will grow by 4% to 8% per year.
"Bitcoin Yield" excludes the fluctuations in Bitcoin prices and micro-strategy stock prices. Looking at this KPI purely from a Hodler perspective seems to echo what Saylor said, "Continuously buying Bitcoin is an exit strategy."
Note 1: BTC Yield after 2024 is calculated based on the end of 2023 and is the YTD (Yield To Date) value.
Note 2: MicroStrategy will conduct a 10-to-1 stock split on August 7, 2024, so the actual total number of shares on September 12 is 229,732 thousand shares. The author presents it as 22,973 thousand shares for the sake of unification.
Other listed companies buying Bitcoin
Mining company Marathon Digital adopts comprehensive HODL strategy
Mining company Marathon Digital is the company with the second largest number of Bitcoins among listed companies. According to Bitcoin Treasures, Marathon Digital currently owns 26,200 Bitcoins. Its own mining itself has mined Bitcoins. The company even announced in August Announced a comprehensive HODL strategy, in addition to fully holding mined Bitcoins, Marathon Digital also followed the micro strategy and issued US$250 million in convertible bonds to buy Bitcoins.
(Mining company Marathon announced a HODL strategy to purchase an additional 100 million bitcoins and then issue convertible bonds)
Block launches Bitcoin DCA plan
Block (formerly Square), the payment platform owned by Twitter founder Jack Dorsey, announced that starting in April, it will invest 10% of its gross profits from Bitcoin products into purchasing Bitcoin every month. It currently owns 8,211 Bitcoins, ranking seventh among public companies.
(Block launches Bitcoin DCA plan and invests 10% of gross profits into purchasing BTC every month)
Japanese version of MicroStrategy Metaplanet
Metaplanet, a Japanese multi-business company that started out as a hotel (including Web3 consulting business), has decided to start buying Bitcoin after Sora Ventures, 210k Capital and other capital institutions and individuals invested in it this year. to generate revenue.
(1 billion yen bought BTC, Japanese stock Metaplanet rose nearly 90% daily! Sora Ventures took over to create "Asian micro-strategy")
Metaplanet currently owns 398.8 Bitcoins, ranking it 27th among public companies.
In addition, Japan's tax system also makes Metaplanet a tax avoidance export, because the profit tax on currency purchases in Japan is as high as 45% (starting from 5% based on annual income), but the maximum on stock purchases is only 20%, which is also where Metaplanet is. One of the reasons why Japan has successfully attracted investors to buy.
(Why is Japan’s crypto tax regime good for Japanese micro-strategy Metaplanet stock price?)
How to assess the value of these companies?
Bitcoin’s ratio to company market capitalization
If we look at these companies purely from the perspective of holding Bitcoin, the fairest benchmark should be the ratio of Bitcoin to the company's market capitalization. The following table is calculated based on the Bitcoin price of 58,700 US dollars and the USD/JPY exchange rate of 140.50 before the deadline of today (9/16). It is calculated and compiled based on the stock price and total number of outstanding shares on the CNBC website, as well as the Bitcoin holdings of each Bitcoin Treasures company. As shown in the table below.
This table only selects four companies with different industries. The author believes that each company has its own characteristics. Among them, the one with the highest ratio of Bitcoin to the company's market capitalization is naturally MicroStrategy, with a proportion as high as 50%, while the mining company Marathon Digital ranks second with 32.4%, and Metaplanet is 13.17%, while Block only accounts for 1.22%.
The author believes that this data represents the important proportion of Bitcoin in his company's business.
Should we focus on our profession or resurrect ourselves?
MicroStrategy is an American company that provides business intelligence, data analysis, mobile software development and cloud computing. It was founded in 1989 and went public in 1998. Its main competitors include Salesforce, IBM's Cognos and Oracle's BI platform.
Lian News has compiled MicroStrategy’s financial reports from 2020 to the present. Let’s take a look at whether MicroStrategy’s software business is profitable. The following table summarizes the revenue and cost analysis for the full year of 2021/2022/2023 and the first half of 2024. MicroStrategy's software gross profit has always remained above 70%, making it a quite profitable company.
Because MicroStrategy regards the purchase of Bitcoin as an important strategy for the company's development, in the financial statements, the impairment of digital assets related to the profit and loss of the Bitcoin market price assessment is also listed in operating expenses. It is conceivable that Bitcoin purchase, custody, etc. The cost is also included in the administrative expenses in the operating expenses.
However, even if we deduct the impact of digital asset impairment, MicroStrategy's operating profit rate has dropped from 11.87% in 2020 to negative this year. The operating profit excluding digital asset impairment in the first half of this year was -32.25 million US dollar, it can be seen that its software industry continues to decline.
Or has MicroStrategy already announced its transformation into a “Bitcoin development company” and doesn’t need to pay too much attention to the software business?
Two other companies that were once called "zombie companies": Japanese hotel industry Metaplanet and American health technology company Semler Scientific. This year, their stock prices rose sharply due to their adoption of micro-strategy Bitcoin strategies, and they gradually got out of trouble. Executives from these companies also shared their transformation experiences at Bitcoin 2024, a Bitcoin conference in Tennessee.
(Enterprise borrowing corpses to bring back souls! Bitcoin brings the rebirth of Metaplanet and Semler Scientific)
For example, the mining company Marathon Digital itself mines Bitcoin, and the company's business is closely related to Bitcoin; while the payment operator Block also operates Bitcoin payments, and its products also exist around Bitcoin.
For those companies that rely solely on the price of Bitcoin to increase their company valuations, while using Bitcoin to attract attention, whether their business has sustained growth is also an important factor worthy of careful consideration by investors.
This article Many companies are vying to use Bitcoin as an asset reserve. Should they focus on their own business or resurrect the corpse? First appeared on Chain News ABMedia.
