Since August 2020, Strategy, formerly known as MicroStrategy, has been accumulating Bitcoin. Under Michael Saylor’s management, this strategy has been hugely successful, leading to a 3000% increase in the price of the shares. Under the blueprint developed by Saylor, the company uses periodic issues of high yield, perpetual preferred stock to finance adding bitcoin to the balance sheet. It should be noted that since Strategy began to purchase bitcoins, the price has been very volatile but currently trades at 10 times the company’s initial purchase price.
Not surprisingly, Saylor’s success has attracted a legion of prospective imitators, some 80 or more, at last count.
Would be copycats should remember that crypto “assets” do not pay dividends, which can create cash flow challenges. It is also important for both those attempting to pursue this strategy, and for potential investors, to understand the full range of risks.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
