Michael Saylor is like that kid who kept his Pokémon cards in mint condition—spotting value early when no one else did.
Since MicroStrategy ($MSTR) started its ‘Bitcoin Strategy’ in August 2020 (aka buying as much $BTC as possible), its market cap has skyrocketed 20x. 🤯
Now, Saylor's back at it again, planning to sell $700M worth of convertible notes (loans that can turn into discounted $MSTR shares) – likely to buy even more Bitcoin.
But why does this strategy work? 🤔
Here’s the magic behind it:
MicroStrategy borrows money and issues convertible notes to load up on Bitcoin. On its debt, it pays 1.7644% interest annually, and on the notes, just 0.875%.
Right now, its total debt, including convertible notes, is $3.9B. The yearly interest on this debt, even at the highest rate, would be around $68M.
“Cool, but what’s the point?”
Glad you asked! Here’s where it gets interesting:
MicroStrategy isn't just a Bitcoin treasury – it’s also a legit software company with revenue. Last quarter, it earned $80.5M in gross profit, meaning it can easily cover its debt payments. 💸
Meanwhile, the company's Bitcoin stash benefits from price appreciation. With Bitcoin up 12.2% YTD on $MSTR's holdings and showing an average 45% return over the past 5 years, the numbers start to look mind-blowing.
If Bitcoin’s historical return rate continues, MicroStrategy could see a compounded 43.23% return per year after covering its debt.
(Infinite money hack, anyone? 💸)
"But why buy $MSTR for Bitcoin exposure when I can just buy $BTC?" – You, probably.
Holding $MSTR comes with perks like regulatory clarity and – crucially – price performance.
During bear markets, $MSTR’s value mirrors its Bitcoin holdings. But in bull markets, its value is usually higher than its Bitcoin assets alone. 👇
Right now, when MicroStrategy buys $1B in Bitcoin, its market cap tends to jump $2B (assuming Bitcoin’s price stays flat). By the same token, every $1 increase in Bitcoin should add $2 to $MSTR’s market cap. (But it can work both ways in a dip).
It’s not a perfect science, but you get the picture.
The real question is: How high will MicroStrategy’s premium soar when we enter the Banana Zone? 🍌
