Inlate 2021, Semler Scientific, a promising Santa Clara-based medical technology company, was facing a world of trouble. Growth was slowing and the tiny company had just missed its Q3 revenue and earnings targets. Wall Street punished the stock, sending it 80% lower, as it was caught in the Nasdaq downdraft of early 2022 over inflationary fears and Fed tightening. Then in 2023, after $800 million of its $1 billion market cap had already evaporated, Medicare Advantage announced changes threatening reimbursement for its core product, QuantaFlo, software sold to doctors that detects signs of peripheral arterial disease during a five minute office visit. QuantFlo accounts for more than 80% of Semler’s $68 million in annual revenues.

Semler Scientific’s stock was in a deep rut, so the company brought in Eric Semler, son of the founder and activist hedge fund manager from New York City’s TCS Capital Management, known for rattling the cages of companies like Angie’s List, Yelp and Nielsen/Net Rating. His solution? Use its cash to buy bitcoin.

“We had to figure out how to maximize the value of our cash and stock,”says Semler, 59, now Chairman of the board, who described his family company as a zombie. “There were no promising acquisition targets, and a stock buyback was not preferred because the company already had a small float and was thinly traded, so there was no reason to make the float smaller.”


Micro-caps Betting On Bitcoin

In the last month these 3 small stocks have experienced surges after copying large cap MicroStrategy's playbook.

Semler Scientific Inc (SMLR) Price % Change

Genius Group Ltd (GNS) Price % Change

MicroStrategy Inc (MSTR) Price % Change

Metaplanet Inc (MTPLF) Price % Change

In May 2024, with software company-turned-bitcoin fund, MicroStrategy, as its model, Semler unveiled its own Bitcoin Treasury Strategy, with a goal of “potential returns, diversification and inflation hedging.” The company would use its $60-plus million in balance sheet cash, plus the proceeds of a stock offering managed by Cantor Fitzgerald to purchase bitcoin.

In the last six months Semler has accumulated 1,570 tokens worth $149 million at an average price of $75,000. Its bitcoin gains amount to $31 million for 2024, which is 50% greater than the company’s net income of $20.6 million for 2023. Like MicroStrategy ‘s billionaire CEO Michael Saylor, Semler has even gone as far as touting his company’s recent BTC Yield of 58.4%, a dubious measure of the percentage change in the ratio of its bitcoin holdings to outstanding shares of common stock.

Semler’s stock is up 112% since the company began buying bitcoin in May, more than triple bitcoin’s 34% price appreciation over the same period. And like software company MicroStrategy, whose stock is up 3,150% since it embarked on its bitcoin buying spree in 2020, and 538% year-to-date, Semler says he isn't giving up on medical devices, “We're very committed to our medical business. We believe that it has good potential,” say Semler. Still, Semler, who is running TCS Capital, is devoting plenty of his time these days courting crypto fans in Youtube interviews, podcasts and appearing at crypto events.

Semler Scientific is part of a wave of small public companies looking to infuse their sagging stocks with the pixie dust fueling the current bull market in crypto, in the same way $90 billion (market cap) MicroStrategy has by hoarding bitcoin. In crypto markets valuations, are driven as much by faith as they are by fundamentals. Dogecoin, a so-called meme token whose logo is a Shiba Inu dog, has a market capitalization of $60 billion, up 200% in the last 30 days. It is a symptom of irrational exuberance reminiscent of the dotcom craze of 1998 and 1999, when every type of company, from Pets.com to Boo.com and eToys.com, was adding “.com” to their names and phrases like the “world wide web” to their mission statements. Virtually all of these bubble stocks collapsed when internet stocks crashed in 2000.

Japan-based Metaplanet is another convert to the MicroStrategy playbook. “His [Saylor’s] ability to articulate Bitcoin's role as a superior reserve asset and a hedge against monetary debasement resonated deeply with me,” says Metaplanet CEO Simon Gerovich, from Tokyo. “Additionally, his willingness to share his playbook, from capital-raising techniques to the intricacies of navigating Bitcoin accounting, gave us the confidence to tailor a similar strategy for Metaplanet, particularly in Japan's unique economic landscape.”

In the beginning of 2024, Metaplanet desperately needed a reset. Originally set up as a real estate company with $34 million in assets and focused on hotels, the company faced an existential crisis when the covid pandemic hit. “During COVID, Japan's decision to close its borders caused our hotel business revenue to drop to almost zero overnight,” he says. “The abrupt revenue loss revealed our model’s vulnerability to such disruptions.” Its stock on the Tokyo Stock Exchange had fallen by 85% from 2020 to the beginning of 2024.

Gerovich decided that hotels were too risky and he needed to go digital. “By pivoting to Bitcoin, we transitioned from a business model vulnerable to externalities to one built around an asset that is decentralized, resilient, and aligned with the trends of a digital-first global economy,” says Gerovich

So beginning in April, Metaplanet raised more than $70 million through loans, stock sales to existing shareholders, and private placements and began buying bitcoin in the open market. So far in 2024 the company has purchased 1,142 bitcoin for and is sitting on gains of about $30 million. Each open market purchase is accompanied by press releases trumpeting the buys and Gerovich has been a fixture on the bitcoin conference circuit, including an appearance in Nashville at Bitcoin2024, where former President Trump was a headliner. Metaplanet’s stock has been a rocket. It’s shares, which are traded in yen, are up 1,571% so far year, its shareholder base has exploded from 5,000 to 50,000 and its market cap is $612 million.

Metaplanet has gone even further in corporate makeover than Semler Scientific or MicroStrategy. It has sold off every property but one hotel and used the proceeds to fund its crypto purchases. Another driver in Metaplanet’s stock surge has been Japanese laws which discourage investing directly in crypto, because it is taxed at ordinary income rates, which are as high as 55% says Gerovich. Capital gains from owning Metaplanet’s stock would be taxed at a 20% rate.

Says Gerovich, “By aligning our corporate strategy with Bitcoin, we’ve created a tax-efficient vehicle for individuals and institutions seeking exposure to bitcoin without facing the punitive tax implications of direct ownership.”

Singapore’s Genius Group, is another tiny public company chasing bitcoin riches. In the last few weeks it has gone from an edtech startup using AI to “a leading AI-powered, Bitcoin-first education and acceleration group.”

Here is Genius Group CEO Roger Hamilton’s explanation of its latest pivot:

“2025 will be the year that we see the clear beginning of a major collapse [in the U.S. dollar]. It also happens to be the year that we have Elon Musk and Sam Altman saying that we could be expecting artificial general intelligence. The two of them are interrelated. The moment you've got something faster or smarter than human intelligence on the planet, and they're creating their monetary system, they will adopt Bitcoin. That’s my bet.”

Genius announced its bitcoin treasury strategy on November 12th and made its first bitcoin purchase of 110 bitcoin for $10 million on November 18th, at an average price of $91,372.

It’s already paid off. It’s micro-cap stock surged 150% on the NYSE’s Arca after the announcement , and while it has pulled back, it still is up 40% , giving it a market capitalization of nearly $16 million. Hamilton says his goal is to obtain 1,000 bitcoin, which would equate to a $1 billion treasury if bitcoin reaches $100,000.

It’s an ambitous goal, considering the company lost $5.7 million on $23 million in revenues in 2023. Outside of any bitcoin profits, its likely to have losses again in 2024.

“Our focus is not going knocking on the doors of investors in Manhattan,” says Hamilton, “Our focus is going to the Bitcoin community and saying, look, here is a way for you to outperform Bitcoin because you're buying something that has the same value growth but has a value add layer on top of it, which is what we are doing with education.”

M

ore bitcoin bandwagon joiners will surface as the benchmark cryptocurrency’s price approaches $100,000. In the past week alone, three money-losing micro-cap stocks, Chicago’s Cosmos Health, Los Angeles-based Thumzup Media Corp and Solidion Technology, a battery maker in Dallas, all announced plans to add bitcoin to their balance sheets.

“I meet with companies all the time, always asking them about buying bitcoin,” says Semler, 8.5% owner of his company, whose market cap has more than doubled to $445 million under his new bitcoin buying plan. “I'd like to see more companies do it, but they just still kind of laugh at you.”

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