MicroStrategy, once a traditional business intelligence (BI) software provider, has transformed into a leading corporate advocate for Bitcoin. With Bitcoin repeatedly hitting all-time highs, the company’s market presence and influence have grown significantly. This article explores MicroStrategy’s journey, its strategic shift under founder Michael Saylor, and the financial innovations that enabled its massive Bitcoin acquisitions.
What Is MicroStrategy’s Core Business?
Founded in 1989 and publicly listed in 1998, MicroStrategy originally specialized in business intelligence, data analytics, mobile software development, and cloud computing. Its main competitors included Salesforce, IBM’s Cognos, and Oracle’s BI platforms.
Business intelligence (BI) refers to technologies and practices that help organizations analyze data and improve decision-making. MicroStrategy’s platform offers data modeling, visualization, and actionable insights through user-friendly dashboards.
In recent years, the company has integrated artificial intelligence (AI) into its solutions, marketing itself as an AI-enabled BI platform built on trust and reliability.
Michael Saylor: The Visionary Behind the Bitcoin Strategy
Michael Saylor, co-founder of MicroStrategy, is a well-known Bitcoin proponent. He has frequently referred to Bitcoin as "digital gold" and emphasizes its scarcity as a key value proposition.
In September 2020, MicroStrategy adopted a Treasury Reserve Policy, making Bitcoin its primary reserve asset. The company began using cash flows, debt financing, and equity sales to accumulate Bitcoin systematically.
Saylor believes that this strategy enhances MicroStrategy’s brand visibility and creates a virtuous cycle: software revenue fuels more Bitcoin purchases, which in turn attracts more investors.
Despite stepping down as CEO during a market downturn, Saylor remains a vocal Bitcoin advocate. He accepts a symbolic $1 salary and compensates himself largely through stock options. In 2024, he exercised expiring options worth nearly $370 million, reinvesting a portion into Bitcoin.
Rebranding as a “Bitcoin Development Company”
In February 2024, MicroStrategy announced a rebranding effort to position itself as a “Bitcoin development company.” The firm advocates buying its stock (MSTR) over direct Bitcoin investment, citing several advantages:
- Ease of trading through standard brokerage accounts
- No extra fees (avoiding gas fees or ETF management costs)
- Continuous Bitcoin accumulation through cash flows
- Strategic leverage via corporate debt issuance
- Downside protection from existing software business
- Risk management through corporate structure
The Bitcoin Flywheel Effect
MicroStrategy started buying Bitcoin in 2020. The company uses a combination of retained earnings, debt issuance, and equity sales to fund its purchases.
In late 2024, MicroStrategy unveiled the "21/21 Plan," aiming to raise $42 billion in capital—half through equity and half through fixed-income securities—to further expand its Bitcoin holdings.
Equity Offerings
MicroStrategy has periodically issued new shares to raise capital. As of November 2024, the company had issued over 191 million Class A shares and 19 million Class B shares.
Convertible Notes
A key tool in MicroStrategy’s strategy is issuing convertible notes. These are bonds that can be converted into stock if share prices exceed a predetermined level. They effectively function as corporate debt combined with a call option on the company’s stock.
MicroStrategy has issued six series of convertible notes totaling $7.264 billion. The company often redeems high-interest notes early to reduce costs and free up collateral (often Bitcoin).
Timing is critical: MicroStrategy tends to issue convertible notes when its stock trades at a significant premium to Bitcoin. This allows the company to set high conversion prices and raise capital at near-zero effective cost.
Recent convertible notes carried a 0% coupon and conversion premiums as high as 55%, indicating strong investor demand. Several Taiwanese financial institutions, including Cathay Securities and Fubon Securities, have participated in these offerings.
Introducing the “Bitcoin Yield” KPI
MicroStrategy introduced “Bitcoin Yield” as a key performance metric. It measures the ratio of Bitcoin holdings to fully diluted shares—incorporating common stock, convertible notes, options, and other equity instruments.
This metric filters out short-term price volatility, focusing instead on Bitcoin accumulation per share. As of November 2024, MicroStrategy’s Bitcoin Yield reached 59.3%, meaning shareholders effectively held 59% more Bitcoin than at the end of 2023.
The Largest Corporate Bitcoin Holder
As of November 2024, MicroStrategy held 386,700 Bitcoin, acquired at an average cost of $56,761 per coin. At a market price of $96,700, the stash was worth approximately $37.4 billion.
MicroStrategy is the largest corporate holder of Bitcoin, followed by Marathon Digital with 34,794 Bitcoin. Marathon has adopted a similar HODL strategy, holding mined Bitcoin and issuing debt to buy more.
While MicroStrategy’s approach has inspired other companies, analysts caution that this model may be better suited to smaller firms with higher risk tolerance.
Trading at a Significant Premium
MicroStrategy’s stock has become one of the most traded U.S. equities, even surpassing Tesla (TSLA) and NVIDIA (NVDA) at times.
However, research firm Citron Research recently published a short report on MSTR, arguing that the stock trades at an unjustified premium relative to its Bitcoin holdings. With easier access to Bitcoin via ETFs and crypto stocks, Citron believes MSTR is overhyped despite remaining bullish on Bitcoin itself.
As of late 2024, MicroStrategy’s market cap implied a 178% premium over the value of its Bitcoin holdings.
Can the Bitcoin Flywheel Keep Spinning?
When asked about taking profits, Michael Saylor stated that he “will always buy at the top” and that continuous accumulation is MicroStrategy’s exit strategy.
However, a significant Bitcoin correction could strain this model. Leverage and investor FOMO have amplified gains but may also exacerbate downside volatility.
According to MicroStrategy’s Q3 2024 financial report, its software business remains unprofitable. The company appears fully committed to its identity as a Bitcoin-focused firm.
👉 Explore advanced Bitcoin accumulation strategies
Frequently Asked Questions
What is MicroStrategy’s primary business?
MicroStrategy began as a business intelligence software provider. It now also operates as a Bitcoin development company, using corporate strategies to accumulate Bitcoin as a primary reserve asset.
Why does MicroStrategy buy Bitcoin?
The company views Bitcoin as a scarce digital asset and long-term store of value. Its strategy aims to enhance shareholder value through systematic acquisition and holding.
How does MicroStrategy fund its Bitcoin purchases?
It uses operational cash flow, equity sales, and corporate debt issuance—particularly convertible notes—to raise capital for Bitcoin acquisitions.
What is Bitcoin Yield?
Bitcoin Yield is a metric MicroStrategy uses to measure the growth of Bitcoin holdings per fully diluted share, excluding short-term price movements.
Is MicroStrategy’s stock overvalued?
Some analysts believe MSTR trades at a premium compared to its Bitcoin holdings. Investors should assess risk based on both Bitcoin exposure and corporate performance.
Can other companies replicate this model?
While possible, the strategy requires careful capital management and high risk tolerance. It may be more suitable for smaller firms or those with aligned shareholder interests.
Investing in cryptocurrencies carries significant risk. Prices are highly volatile, and you may lose your entire investment. Always conduct thorough research and consider your risk tolerance before investing.