Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Meren Talk
Speaker 1: to Your Money, the personal finance edition of Meron talks Money.
Speaker 1: In these bonus podcasts, we talk about the best strategies
Speaker 1: for making the most of your money. I'm Meren Thumset
Speaker 1: Web and with me senior reporter of Money Distilled author
Speaker 1: John steppegg Hi, John Hi, melm Okay. So in this episode,
Speaker 1: we are going to talk about something actually we have
Speaker 1: never talked about before. We've talked about bitcoin a lot,
Speaker 1: but we haven't talked about this new thing. Bitcoin treasury
Speaker 1: is actually not that new, but relatively new to the UK.
Speaker 1: So we think this deserves a conversation, maybe a little scrutiny.
Speaker 1: I think possibly UK investors are beginning to be aware
Speaker 1: of what's happening. So we've got London listed companies, mainly
Speaker 1: smaller companies, some actual companies that are originally minus we're
Speaker 1: going to talk about in a minute who are started
Speaker 1: stockpiling bitcoin in order to get their share price up.
Speaker 1: So we're going to talk about why they're doing this,
Speaker 1: why it might be a concerning trend to investors. Maybe
Speaker 1: there are better ways to get access to cryptocurrencies. So
Speaker 1: to help us dig into all this, we have invited
Speaker 1: our old friend Dominic Frisbee to join us. Now. Dominic,
Speaker 1: many of you will know he's the author of the
Speaker 1: investment newsletter of the Flying Frisbee. He's written a lot
Speaker 1: of very good books. He's sings some great songs, and
Speaker 1: loyal listeners might know him as a recurring guest on
Speaker 1: the Adam Smith panel show that we do at the
Speaker 1: Frinch Festival every year. Dominic, welcome, Thank you so much
Speaker 1: for joining us today.
Speaker 2: It's a pleasure to be here.
Speaker 3: Good.
Speaker 1: Now, I've probably said everything wrong in my introduction, so
Speaker 1: let's start like this. Will you tell us what we're
Speaker 1: talking about? What is a bitcoin treasury? Why have they
Speaker 1: come to the UK?
Speaker 2: Well, it's funny enough. Actually in your introduction I think
Speaker 2: you said absolutely everything right, and not for the first
Speaker 2: time Mary.
Speaker 1: Thank you, Dominic.
Speaker 2: But in your sort of intro to your intro, you
Speaker 2: said about how this is a show for people who
Speaker 2: were thinking about what to do with their money. And
Speaker 2: this whole thing began with an American CEO called Michael
Speaker 2: Sailor who in twenty twenty was looking around at what
Speaker 2: was going on during COVID and he was wondering what
Speaker 2: to do with his corporate treasury to protect it from
Speaker 2: getting eroded by inflation, and so he knew he couldn't
Speaker 2: hold US dollars because effectively he was going to lose
Speaker 2: ten or fifteen percent to money printing every year, probably
Speaker 2: more during COVID. I think at the moment, money printing
Speaker 2: or you know, money supply growth, whatever you want to
Speaker 2: call it, is at seven or eight percent globally, So
Speaker 2: you have to make seven or eight percent just to
Speaker 2: stand still. If you're a corporation running a business, you
Speaker 2: have to grow at seven or eight percent just to
Speaker 2: stand still. And I think that's quite an interesting way
Speaker 2: of framing the gradual erosion of everything that's taking place.
Speaker 2: And so Sailor was looking around at you know, do
Speaker 2: I put my corporate treasury in really stake? Do I
Speaker 2: put it in gold? Do I put it in s
Speaker 2: and p track of funds? What do I do? And
Speaker 2: he eventually arrived at the conclusion of bitcoin, and then
Speaker 2: in quite an astounding way, he took as we call it,
Speaker 2: the orange pill. He was orange pilled in a way
Speaker 2: that I've never seen anyone orange pill before, and has
Speaker 2: transformed himself into the most articulate proponent of bitcoin that
Speaker 2: there is.
Speaker 1: Yeah, Ben, so just be clear, anyone who held micro
Speaker 1: Strategy shares then when he made this decision has made
Speaker 1: an atholete fortune because he's ridden the whole bitcoin wave.
Speaker 2: So micro Strategy was what you would call a zombie company.
Speaker 2: It had a sort of bit of a boom in
Speaker 2: during dot Com, and then basically after dot Com, for
Speaker 2: the next twenty years it just range traded between ten
Speaker 2: and twenty dollars. It just went absolutely nowhere. And you know,
Speaker 2: it had quite a good software business, but it wasn't
Speaker 2: changing the world, and it wasn't making fortunes for its
Speaker 2: investors and so on. But the shinto transforming it. Since
Speaker 2: transforming his company, he basically initially just held his corporate
Speaker 2: treasury in bitcoin. But this model worked so well that
Speaker 2: he just kept raising more and more money and just
Speaker 2: simply buying bitcoin with it. He was doing.
Speaker 1: Issuing shares, using the cash to buy bitcoin and iss
Speaker 1: your debt as well, okay debt. Stopped piling more and
Speaker 1: more bitcoin and effectively becoming a play on the bitcoin
Speaker 1: price for.
Speaker 2: A levered play on the bitcoin price, And I think
Speaker 2: he's going to end up the richest man in the
Speaker 2: world as a result of all of this, and I
Speaker 2: think micro Strategy it's already now in the s and
Speaker 2: P five hundred in terms of market cap, and I
Speaker 2: think it'll be one of the top ten companies in
Speaker 2: the world by market cap by the end of this decade.
Speaker 1: If you're in the US, then you want it, and
Speaker 1: you want to hold bitcoin or have a leverage play
Speaker 1: on bitcoin, micro Strategy is an obvious place to go.
Speaker 1: Although not everyone is happy with the share price that
Speaker 1: was sleep well.
Speaker 2: Funnily enough, a lot of his buyers came from the
Speaker 2: UK because the FCA and its wisdom made it impossible
Speaker 2: for UK investors to investing bitcoin when it was five
Speaker 2: thousand dollars. The only way you could get exposure was
Speaker 2: to buy stock in micro Strategy, and so I remember
Speaker 2: writing articles in Money Week and on the Flying Frisbee
Speaker 2: saying to people, look, if you want exposure to bitcoin
Speaker 2: in the UK, just buy micro Strategy, and you.
Speaker 1: Can also just open a coin based account and hold bitcoin.
Speaker 1: You couldn't you have been able to for some years now.
Speaker 2: It's a nightmare. Merry.
Speaker 1: You can do it. Anyone can know you know how
Speaker 1: you dominice You've known me decades now, you know I
Speaker 1: can't do admin. I've got coin Base account.
Speaker 2: Most banks would not allow you to send money to
Speaker 2: crypto exchanges on.
Speaker 1: My credit card.
Speaker 2: Okay, well first Direct Okay, well you maybe First Direct
Speaker 2: was one of the most modern griovy ones, but most
Speaker 2: banks people found it impossible to send money, and Coinbase
Speaker 2: is one of the more regular ones. Gemini too. It's
Speaker 2: a real headache, and especially you can't buy it and
Speaker 2: your SIP and your ES and whereas you can buy
Speaker 2: micro Strategy. It was just much much easier to buy
Speaker 2: micro Strategy stock than it was to buy bitcoin. And
Speaker 2: in fact, the situation we have now is directly a
Speaker 2: cause of the FCA making it so impossible to buy bitcoin.
Speaker 2: I mean it's direct, So the.
Speaker 1: FCA has made it hard to buy bitcoin in general,
Speaker 1: but also in particular, and this possibly is the key
Speaker 1: point here, is that you cannot buy a cryptocurrency in
Speaker 1: any way inside one of the tax wrappers available in
Speaker 1: the UK, so you can't put those are the things
Speaker 1: an ISO account on Coinbase, you can't buy bitcoin or
Speaker 1: any cryptocurrency or did an NFT or anything nuse like
Speaker 1: that and shovel it into your step or your I SEP.
Speaker 1: So what we're talking about here is the market going, well, okay,
Speaker 1: let's give you another way to do that. Yeah. So
Speaker 1: this is very recent in the UK, right, So Smarter
Speaker 1: Web they announced that this is what they were going
Speaker 1: to do only towards the end of April, correct, And
Speaker 1: if you look at the share price at its peak,
Speaker 1: it was up over six thousand percent from the date
Speaker 1: of that announcement. That all these bitcoin treasury companies have
Speaker 1: now come off in the UK, so it's up four
Speaker 1: thousand percent at the moment.
Speaker 2: I think it's two hundred and fifty p or something.
Speaker 1: So that's still I mean, that is extraordinary shift, which
Speaker 1: by the way, surely doesn't reflect the actual value of
Speaker 1: the bitcoin that they hold.
Speaker 2: Well, this is the next this is the big argument.
Speaker 1: Yeah. So actually before we get onto that, let's just
Speaker 1: talk about the other companies. What kind of companies have
Speaker 1: done that, because I mean I've got a list of
Speaker 1: them here and there's what, there's ten eleven companies that
Speaker 1: have done this, made an announcement that they're going to
Speaker 1: adopt at bitcoin treasury strategy. I mean, they're all companies
Speaker 1: that I have never heard of before Bluebird Mining Ventures,
Speaker 1: Vault Ventures, True Spuying Technologies, panther Metals, et cetera. So
Speaker 1: companies that were dabbling in other things. A couple of
Speaker 1: helium explorers, right.
Speaker 2: Yeah, there's a couple of helium exposures of pivoting.
Speaker 1: Yeah, I mean that's one hell of a pivot, although
Speaker 1: I suppose it's all hot.
Speaker 2: Indeed, what you always see when you see these incredible
Speaker 2: bubbles is loads of people jump on the bandwagon. I
Speaker 2: remember uranium in two thousand and six. I was planning
Speaker 2: to set up a uranium explorer based on ones with
Speaker 2: Common because there was just you know, everyone was just
Speaker 2: getting in. So there are lots of operations there.
Speaker 1: Again, you can have a go. I mean there are.
Speaker 1: If you look at this list, there are a couple
Speaker 1: of you know, uranium on one'sworth common type companies and
Speaker 1: there absolutely yeah, I mean there's one. There's one. And
Speaker 1: I don't mean to libel you, Amazing AI, because I'm
Speaker 1: sure you're doing something good. But the company is called
Speaker 1: Amazing AI and they only announced their strategy on the
Speaker 1: twenty fourth of Junet, not very long ago, and sadly
Speaker 1: for them, they have not gone up six thousand percent,
Speaker 1: actually down twelve percent since, Yeah.
Speaker 2: They rose a bit and then fell back a bit,
Speaker 2: but they've only got they raised a bit naughty in
Speaker 2: a way that they raised one hundred and twenty grand
Speaker 2: and the share price was trading at four p and
Speaker 2: I think all the directors got the shares at half
Speaker 2: a p.
Speaker 1: Right moving on, we have these bitcoinstragery companies now, and
Speaker 1: we're effectively putting them into their own sector, aren't we
Speaker 1: bitcoin treasuries. We're forgetting anything else they ever did. Should
Speaker 1: retail investors be buying these things? Dominic?
Speaker 2: Well, you know, Marin, what is a bubble? Tell me
Speaker 2: what a bubble is, and I'll tell you what a
Speaker 2: bubble is.
Speaker 1: Did you tell me what a bubble is?
Speaker 3: First?
Speaker 2: A bubble is a bull market in which you don't
Speaker 2: have a position. Hmm, it's very easy. You know. Everyone
Speaker 2: has been saying bitcoin is a bubble. Bitcoin is a
Speaker 2: bubble for fifteen years now, and it's always people that
Speaker 2: don't have a position, and it's a it's a psychological
Speaker 2: way of coping with the fact that you didn't invest
Speaker 2: and now worried about investing too late. You dismissed it
Speaker 2: as a bubble.
Speaker 1: Okay, Levin, I think I have to interrupt you right now.
Speaker 1: Just ask John a question. John, is bitcoin a bubble?
Speaker 3: Oh? We bitcoin itself as a postive easing.
Speaker 1: Yeah, I'm asking him that first dominic because he's the
Speaker 1: only one of us on this podcast who doesn't have
Speaker 1: any bitcoin.
Speaker 3: Well, I resented furiously, but I think it's a bubble,
Speaker 3: nor a doint has been that owned for two I nically,
Speaker 3: if you look at the chart, isn't very bubbily.
Speaker 1: Okay, well you haven't. You haven't got a coinbased account,
Speaker 1: you haven't got any bitcoin, got any other crypto. So
Speaker 1: let's talk about John. Let's pretend that he's too admin
Speaker 1: useless to open a coin based account, is even worse
Speaker 1: than I am.
Speaker 3: Surely, just one thing, John, The reason I don't own
Speaker 3: bitcoin is because my bank, which was nationwide, stopped me
Speaker 3: from transfer nine hundred quid to my coin base account
Speaker 3: in twenty fifteen. Please do not tell me how much
Speaker 3: that one hundred quid would be.
Speaker 1: What I say, John, myself out of the window, move
Speaker 1: the first direct and just start using your credit cards.
Speaker 1: That's all I'm saying. But which one of these bitcoin
Speaker 1: treasury companies does John buy? I would like him to
Speaker 1: buy panther Metals because you know, they've been looking for
Speaker 1: zinc deposits in Canada. Maybe they'll find some of those too,
Speaker 1: So that you're hedging, John, you're hedging.
Speaker 3: Well, yes, yes, that's a diversify portfolio.
Speaker 1: Sure, Dominic, Sorry, we're gossiping over you do tell us
Speaker 1: what to do.
Speaker 2: I think panther Metals might even be funding their exploration
Speaker 2: of said zinc deposits with their bitcoin treasury. I think
Speaker 2: that's the purpose of it.
Speaker 1: You know, they only have one bitcoin, right.
Speaker 2: Yeah, exactly. So if we go back to the original bubble,
Speaker 2: if you like, which was tulips. You know, there was
Speaker 2: obviously a tulip bubble in sixteen thirty eight, but that
Speaker 2: tulip bubble built an industry that has, you know, brought
Speaker 2: prosperity to Holland for four hundred years and it remains
Speaker 2: at the center of the flower industry today. You could
Speaker 2: say the same back dot com. Dot Com was obviously stupid,
Speaker 2: but the Internet it's bigger than it ever was, and
Speaker 2: so we're seeing that same pattern. So if you ask
Speaker 2: me where are these stocks going next? I will say
Speaker 2: higher and lower and lower and higher. I mean, it's
Speaker 2: a speculative bubble, and there's obviously a lot of opportunists,
Speaker 2: but some of these companies, and the Smarter Web Company
Speaker 2: being one of them, and coincilly and being an other,
Speaker 2: are legitimate. You know, if you like bitcoin believers and
Speaker 2: they are following the Sailor crypto model and they're not
Speaker 2: just sort of fly by nights. And if Bitcoin goes
Speaker 2: from one ten to say one fifty or wherever it's
Speaker 2: going next, then these companies will double and triple them.
Speaker 2: More so, if bitcoin goes back to seventy or fifty
Speaker 2: or whatever, these companies will lose similar amounts.
Speaker 3: The only reason I'd sort of struggle with it is
Speaker 3: because they're specifically. So let's say I'm agnostic one betcoin.
Speaker 3: I don't know strong view either way, but why I
Speaker 3: don't quite get why I would buy what I most
Speaker 3: and investment trust trading a massive premium to its now,
Speaker 3: which is like you know, investing vet coins. And then
Speaker 3: I suppose at least Sailor was the FoST in the space,
Speaker 3: But as far as I'm aware, it's like trading that
Speaker 3: a big premium to the bitcoin holdings up in double
Speaker 3: check that maybe I'm wrong twice. Yeah, And I mean,
Speaker 3: you've got all these new ones, and clearly some of
Speaker 3: them are blake junior uranium minos that explored. Does that
Speaker 3: I haven't got anything. It's a bit like whenever the
Speaker 3: gold ETFs got launched in the gold minos that didn't
Speaker 3: ended up losing a lot of flows because people could
Speaker 3: just access gold directly, except even more so because at
Speaker 3: least the gold miners yard actually digging some gold out
Speaker 3: of the ground at a courst and then selling it,
Speaker 3: whereas with bitcoin they're just buying backcoin and then holding it.
Speaker 3: So this is what I don't understand the nationale for
Speaker 3: these being the good ways to play backcoin.
Speaker 2: I guess I shall attempt to explain the rationale. I
Speaker 2: hope I'm being clear that that My overall position is
Speaker 2: that there is a lot of hot air and you know,
Speaker 2: rolics in this story, but there is also an underlying
Speaker 2: truth to it as well.
Speaker 3: Now it's clear to me that you are saying that
Speaker 3: there's a lot of speavy companies in the space where
Speaker 3: I am. I'm kind of windomly why does this space
Speaker 3: exist at all beyond the regulatory arbertrage element, which I
Speaker 3: think is completely. That makes sense. It makes sense, and
Speaker 3: as much as until there's a bitcoin eta, if evering
Speaker 3: can easily get hold of, which presumably isn't that far away.
Speaker 3: I think the FC is looking at something on noise lanes.
Speaker 2: The traditional way of valuing an investment trust is you go, yeah,
Speaker 2: this investment trust has got a million pounds worth of assets.
Speaker 2: It's only trading at half a million quid. I'm going
Speaker 2: to buy it because it's worth twice its assets. Bizarrely,
Speaker 2: in the bitcoin treasury space, it's almost like the reverse applies. Now.
Speaker 2: MicroStrategy is trading at a value of roughly twice it's
Speaker 2: the value of its bitcoin. So it's the expression is
Speaker 2: m NAV it's market cap to NAV ratio. So Strategy
Speaker 2: has an m NAV of two. And I think that
Speaker 2: Strategy that price is deserved because of what I call
Speaker 2: the sale at premium. The guy's just so charismatic and
Speaker 2: such a articulate proponed to bitcoin. You just get a
Speaker 2: premium because it's Michael Sailor, and he's the visionary and
Speaker 2: he's the leader and so on. But some of these
Speaker 2: other companies. There's another company called Semlar Scientific which is
Speaker 2: training on the navstat and I think it has five
Speaker 2: thousand bitcoins something like that, and its market cap is
Speaker 2: half a billion, so it's trading at an m NAV
Speaker 2: of one. And the CEO of the company, Eric Semler,
Speaker 2: is a very nice man, but he doesn't have the
Speaker 2: charisma that Michael Sailor has, and so you get no
Speaker 2: premium for the management. But if you look at a
Speaker 2: company like Metaplanet, I don't even know what it's m
Speaker 2: NAV is at the moment, but it's many multiples of
Speaker 2: what its actual bitcoins holdings are. And in the case
Speaker 2: of Coincillium, for example, at one point last week, Coincillium
Speaker 2: had a market cap of maybe one hundred and twenty
Speaker 2: million quid and the value of its bitcoin holdings was
Speaker 2: less than five million quid. And similarly, at one extra
Speaker 2: dreen point, smarter Web company at a valuation above a
Speaker 2: billion and I think it's bitcoin holdings worth maybe fifty
Speaker 2: million or something like that. So you know, there was
Speaker 2: a huge premium to m NAV. So there's this new
Speaker 2: thing which people talk about called time to m NAV.
Speaker 2: So if a company has an m NAV of one,
Speaker 2: it can only issue more shares and more debt to
Speaker 2: the value of its bitcoins. Whereas if it has an
Speaker 2: m NAV of ten, it's able to issue paper at
Speaker 2: ten times its value and buy bitcoins with this overvalued paper.
Speaker 2: And then the idea is that the company the value
Speaker 2: of the bitcoin holdings eventually catches up with the value
Speaker 2: of the company. So you have this thing called time
Speaker 2: to m NAV, which is a sort of measure that's
Speaker 2: been devised. And if you can pick up a company
Speaker 2: with a greater time to m NAV, the potential of
Speaker 2: that company to grow its bitcoin holdings to reach its
Speaker 2: m NAV grows greater. But there are also, at the
Speaker 2: same time, loads and loads of parallels, if you like,
Speaker 2: to the old fashioned pyramid scheme, and the earlier you
Speaker 2: get in the pyramid scheme, the more money you make.
Speaker 2: And because this is just suddenly happened in the last month,
Speaker 2: everyone's really trying to get in early to be the
Speaker 2: guy who you know, makes all the money. I was
Speaker 2: lucky enough to buy coincillion at six p ten days
Speaker 2: later it was ninety p ten day. That includes a
Speaker 2: Saturday and a Sunday.
Speaker 1: So did you keep it? Did you sell it?
Speaker 2: I took my initial steak off the table they're in,
Speaker 2: and I took a little bit more off the table,
Speaker 2: and looking back, the stock is now twenty five p.
Speaker 2: I should have taken more off the table, but my
Speaker 2: attitude was I'll just let the run, I'll enjoy, I'll
Speaker 2: get the rest of the free and see what happens.
Speaker 2: There are some people who are using this measure with
Speaker 2: great success. So we can mock and scorn and all
Speaker 2: the rest of it, but they are making a great
Speaker 2: deal more money.
Speaker 1: They're making money. Not I get that. I mean, I
Speaker 1: suppose that the positive side to this, John, and the
Speaker 1: thing that well we should bring out before we finish,
Speaker 1: is that it is however it happening. It is great
Speaker 1: to see retail and festas engaged with the listed store market.
Speaker 1: I know this is not the way you want it
Speaker 1: to happen, but I still look at it and I
Speaker 1: think that more people are engaged with the store market,
Speaker 1: the better. And what the stock market is doing here
Speaker 1: is saying there's something you guys want, and that's what
Speaker 1: the market is supposed to do. So we should approve
Speaker 1: of that mechanism, and we should approve of people using
Speaker 1: that mechanism to get what they want, even if you
Speaker 1: don't approve of the thing they're buying. Am I right,
Speaker 1: Dominic work with me here. Yes.
Speaker 2: The thing is there's so much pent up demand over
Speaker 2: many years, and you know that sort of tap has
Speaker 2: suddenly been opened, and that's what's created this wild helter
Speaker 2: skelter ride. You have to think psychologically, where are we
Speaker 2: in the bubble? Where are we in the hype cycle
Speaker 2: rather than in turn of traditional investment metrics.
Speaker 1: Dominic, thank you so much for joining us today, and John,
Speaker 1: thank you as ever. Thanks for listening to this week's
Speaker 1: Marin Talks Your Money. If you like us show, rate review,
Speaker 1: and subscribe wherever you listen to podcasts. Also, be sure
Speaker 1: to follow me and John on ex or Twitter and
Speaker 1: Dominic of course, what are you on Twitter?
Speaker 2: Dominic, I'm at Dominic Frisbee and the website is the
Speaker 2: Flying Frisbee dot com.
Speaker 1: Thank you. I'm at marinsw and John is John Underscore Stepic.
Speaker 1: This episode was produced by some Asadi Productions of Broughton
Speaker 1: sound designed by Moses and Questions and comments on this
Speaker 1: show and all our shows are always welcome. Our show
Speaker 1: email is merin Money at Bloomberg dot net.