What do Tesla CEO Elon Musk, Square CEO Jack Dorsey and MicroStrategy head Michael J. Saylor have in common? Quite simply, all three are gifted founders who have launched billion-dollar companies. But they also share another passion: bitcoin.
Corporate leaders' investments in the cyber currency are making waves in the crypto market. Bitcoin, for example, has more than doubled in value this year and just marked a new all-time high. For MicroStrategy's Michael Saylor, however, it seems the oldest coin is nowhere near the end of the line. The business intelligence company he leads has been buying briskly all year. Most recently, MicroStrategy acquired 5,050 BTC in mid-September for around USD 243 million at an average price of USD 48,099 per unit. This brought the tech firm's total holdings to 114,042 BTC, for which Saylor has forked out a total of just under USD 3.2 billion. At the current price, however, they are currently worth far more than USD 7 billion. Saylor isn't done yet, though: "Today, MicroStrategy is the world's largest publicly traded company that owns Bitcoin, with over 114,000 BTC," the 56-year-old shared when presenting its latest interim report, adding: "We will continue to explore opportunities to raise additional capital to execute our Bitcoin strategy.
MicroStrategy isn't all crypto, though; in operations, the Vienna, Virginia-based company offers mobile application and business intelligence (BI) software, as well as cloud-based solutions. Revenues are primarily generated through subscription services, product licenses and support services. While these areas are not currently growing as dynamically as bitcoin, MicroStrategy still managed to beat expectations with its latest interim report - even if there is a decline on the earnings side. Net income, adjusted for stock-based compensation, digital asset impairments and interest expense, fell slightly from USD 2.06 to 1.86 per share. However, the consensus estimate was only USD 1.12, so the company beat the forecast by two-thirds. In the second quarter, MicroStrategy actually reported 135.6% better than expected. Revenue for the period advanced 0.5% to USD 128.0 million. "MicroStrategy delivered strong third quarter results that demonstrated the successful execution of both our operational and digital asset strategies," Saylor commented on the latest numbers. He credited increasing adoption of its cloud solutions, as well as fundamentally higher demand for the company's platform, for the success.
On the stock market, the success course has recently stuttered somewhat. After a brilliant rise from USD 120 in mid-2020, the price shot up to over USD 1,000 within a few months. This was followed by a consolidation that has continued to this day. Since March 2021, the stock has essentially hovered between USD 600 and 800. Apparently, investors are having a hard time finding the company's fair value. On the one hand, the company is growing slowly operationally, but at the same time has an ambitious P/E ratio of over 100. On the other hand, the current market cap of USD 8.2 billion is only slightly above the current book value of bitcoin investments. This means the operating business is currently valued at only around one billion. Ultimately, it is likely the reliance on the highly volatile cryptocurrency that makes investors hesitant to grant MicroStrategy a higher valuation.
This investor hesitation can be translated into double-digit percentage returns with the new Callable Barrier Reverse Convertibles. The CHF version offers an attractive interest rate of 14% p.a. with a maximum term of 15 months, while the USD-denominated product even comes with a coupon of 15% p.a., which is paid out quarterly. Furthermore, the products are equipped with comfortable risk buffers of 41%. As a result, MicroStrategy's stock can even decline moderately without diminishing the return opportunity. Only if the barrier is breached could there be downside. Then the closing price decides about profit or loss of the investment. If the underlying makes it back to the starting level, the full nominal is paid out in addition to the secure coupon. Otherwise, the redemption is based on the performance of the MicroStrategy share.
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