1 00:00:02,560 --> 00:00:09,799 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Micro Strategy still buying 2 00:00:09,800 --> 00:00:13,000 Speaker 1: bitcoin amid the tokens record run. It's bought the digital 3 00:00:13,039 --> 00:00:16,639 Speaker 1: currency for six straight weeks, bringing its total haul to 4 00:00:16,720 --> 00:00:19,880 Speaker 1: forty five billion dollars. That's all before micro Strategy joins 5 00:00:19,920 --> 00:00:23,200 Speaker 1: the Nasdaq one hundred index next week. Now, the company's 6 00:00:23,200 --> 00:00:26,479 Speaker 1: share price is outperforming bitcoin itself this year, as retail 7 00:00:26,480 --> 00:00:30,600 Speaker 1: traders and hedge funds pile in and capitalize on the volatility. 8 00:00:30,920 --> 00:00:33,320 Speaker 1: I'm pleased to say that we're joined now by MicroStrategy 9 00:00:33,320 --> 00:00:36,760 Speaker 1: co founder and executive chairman Michael Sailor, And of course 10 00:00:36,800 --> 00:00:38,960 Speaker 1: we're going to get to the bitcoin purchases, but I 11 00:00:39,000 --> 00:00:41,519 Speaker 1: actually want to start with the politics of it all, 12 00:00:41,600 --> 00:00:45,040 Speaker 1: because you've been relatively less vocal than some of your 13 00:00:45,080 --> 00:00:47,879 Speaker 1: peers in the crypto community about your political views, and 14 00:00:48,240 --> 00:00:50,920 Speaker 1: I have to ask, have you met with President elect 15 00:00:50,960 --> 00:00:51,600 Speaker 1: Donald Trump. 16 00:00:53,760 --> 00:00:58,120 Speaker 2: I've met with a lot of people in the incoming administration, 17 00:00:58,240 --> 00:01:00,319 Speaker 2: but I couldn't comment further than that. 18 00:01:00,720 --> 00:01:03,240 Speaker 1: Okay, I can't comment further than that. I was going 19 00:01:03,280 --> 00:01:05,800 Speaker 1: to ask you about plans, but instead I'll ask you 20 00:01:05,920 --> 00:01:08,160 Speaker 1: about whether or not you would be willing to serve 21 00:01:08,200 --> 00:01:12,160 Speaker 1: in the Trump administration in any capacity. Bloomberg has reported 22 00:01:12,160 --> 00:01:16,000 Speaker 1: that there potentially could be a crypto advisory council. Is 23 00:01:16,040 --> 00:01:18,000 Speaker 1: that something that you might be interested in? 24 00:01:19,400 --> 00:01:24,160 Speaker 2: You know, I'm always willing to provide, you know, thoughts 25 00:01:23,880 --> 00:01:29,520 Speaker 2: on constructive digital assets policy, either in confidence or publicly, 26 00:01:30,200 --> 00:01:32,319 Speaker 2: and if I'm asked to serve on some sort of 27 00:01:32,360 --> 00:01:37,319 Speaker 2: digital assets advisory counseling, probably would do so. 28 00:01:37,480 --> 00:01:40,400 Speaker 3: Yes, Michael, I also want to talk to you about 29 00:01:40,760 --> 00:01:44,280 Speaker 3: micro strategy, your own plans. It's amazing you have announced 30 00:01:44,319 --> 00:01:47,000 Speaker 3: plans to raise forty two billion dollars over three years. 31 00:01:47,000 --> 00:01:49,720 Speaker 3: You announced that back in October. But the rate you're 32 00:01:49,760 --> 00:01:52,880 Speaker 3: going at, and this is through convertable debt offerings as 33 00:01:52,880 --> 00:01:54,960 Speaker 3: stock sales, the rate you're going at, you could fulfill 34 00:01:55,000 --> 00:01:58,880 Speaker 3: that target by January. Are you planning to lift that 35 00:01:59,040 --> 00:02:01,640 Speaker 3: cap and line up more facilities in the pursuit of 36 00:02:01,680 --> 00:02:02,280 Speaker 3: more bitcoin. 37 00:02:04,000 --> 00:02:07,000 Speaker 2: Yeah. When we announced that, it wasn't clear how enthusiastic 38 00:02:07,040 --> 00:02:09,160 Speaker 2: the capital markets would be, but we got a very 39 00:02:09,240 --> 00:02:13,160 Speaker 2: enthusiastic reception. And then after November fifth, with the Red Wave, 40 00:02:13,720 --> 00:02:17,640 Speaker 2: we saw a big sea change in the political environment, 41 00:02:17,720 --> 00:02:20,639 Speaker 2: and so we went faster than we had thought we 42 00:02:20,639 --> 00:02:24,160 Speaker 2: were going to go on October thirtieth. Our goal is 43 00:02:24,200 --> 00:02:29,000 Speaker 2: to is to continue to raise capital primarily through fixed 44 00:02:29,040 --> 00:02:35,200 Speaker 2: income markets. So we'll pursue preferred stock or convertible bond 45 00:02:36,440 --> 00:02:40,600 Speaker 2: or other equity linked financings as long as it's creative 46 00:02:40,639 --> 00:02:44,639 Speaker 2: for our shareholders. When we get through the twenty twenty 47 00:02:44,639 --> 00:02:49,000 Speaker 2: one plan, which is forty two billion in capital, we'll revisit, 48 00:02:49,680 --> 00:02:52,080 Speaker 2: revisit our capital plan, and we'll put in place a 49 00:02:52,120 --> 00:02:55,080 Speaker 2: new plan, subject to market conditions at the time. 50 00:02:54,880 --> 00:02:57,240 Speaker 1: All right, So we'll look forward to that. I am curious, 51 00:02:57,280 --> 00:02:59,280 Speaker 1: you know, with what you've raised so far. It seems 52 00:02:59,280 --> 00:03:02,280 Speaker 1: like you've been tapping the market facility more so than 53 00:03:02,400 --> 00:03:05,160 Speaker 1: converts in order to raise cash, and I'm wondering if 54 00:03:05,200 --> 00:03:07,040 Speaker 1: there's anything to read into that. 55 00:03:08,760 --> 00:03:12,600 Speaker 2: Well, just the equity capital markets were very enthusiastic over 56 00:03:12,639 --> 00:03:16,520 Speaker 2: the past four weeks, and so we're always considering, is 57 00:03:16,560 --> 00:03:19,600 Speaker 2: that the convertible market, is it the fixed income market? 58 00:03:19,680 --> 00:03:21,520 Speaker 2: Is it the equity market we want to go to? 59 00:03:21,800 --> 00:03:24,400 Speaker 2: And that's going to change from time to time. I 60 00:03:24,520 --> 00:03:28,080 Speaker 2: expect that that MAX will shift more heavily toward fixed 61 00:03:28,120 --> 00:03:32,239 Speaker 2: income markets in Q one as we go forward, because 62 00:03:32,639 --> 00:03:35,080 Speaker 2: right now we're probably getting a little bit too de levered, 63 00:03:35,120 --> 00:03:37,880 Speaker 2: and we'd like to actually get more leverage. We have 64 00:03:37,920 --> 00:03:41,280 Speaker 2: about seven point two billion dollars of converts, but four 65 00:03:41,320 --> 00:03:45,240 Speaker 2: billion of the mariority essentially equity. They're through the strike price, 66 00:03:45,240 --> 00:03:47,880 Speaker 2: they're through the call price, and they're trading with a 67 00:03:47,960 --> 00:03:51,840 Speaker 2: delta approximately one hundred percent, So they're looking like equity, 68 00:03:51,840 --> 00:03:55,760 Speaker 2: and so we would like to go back and build 69 00:03:55,880 --> 00:03:59,920 Speaker 2: more intelligent leverage for the benefit of our common stock shareholders. 70 00:04:00,120 --> 00:04:02,320 Speaker 3: Yeah, speaking of common stock, of course, one of the 71 00:04:02,320 --> 00:04:04,400 Speaker 3: big pieces of news is Kitty had talked about was 72 00:04:04,440 --> 00:04:07,680 Speaker 3: your index inclusion and the NASDAQ one hundred and one. 73 00:04:07,680 --> 00:04:11,520 Speaker 3: Big question is would you or are you selling newly 74 00:04:11,560 --> 00:04:15,920 Speaker 3: issued stock to index trackers? Is equity something that you'd 75 00:04:15,920 --> 00:04:17,279 Speaker 3: be looking to add to instead. 76 00:04:19,160 --> 00:04:25,200 Speaker 2: You know, when we execute THEATM, we just sell equity 77 00:04:25,240 --> 00:04:28,080 Speaker 2: into the market. If we like the price and we 78 00:04:28,240 --> 00:04:30,599 Speaker 2: like the terms, and if we think that the equity 79 00:04:30,720 --> 00:04:35,840 Speaker 2: is undervalued, we don't, but we don't specify any particular buyer. 80 00:04:35,920 --> 00:04:39,720 Speaker 2: I think that's just a parapursue to every other investor 81 00:04:39,760 --> 00:04:40,760 Speaker 2: in the market. 82 00:04:40,960 --> 00:04:43,320 Speaker 1: So I want to get a little bit philosophical, because 83 00:04:43,360 --> 00:04:46,560 Speaker 1: you know, we're talking now about Nasdaq one hundred inclusion 84 00:04:46,680 --> 00:04:50,400 Speaker 1: and you're joining, of course, because MicroStrategy is nominally a 85 00:04:50,400 --> 00:04:53,360 Speaker 1: software company. You founded it in nineteen eighty nine as 86 00:04:53,440 --> 00:04:59,880 Speaker 1: a software company. Do you still consider MicroStrategy a software company. 87 00:05:00,120 --> 00:05:03,120 Speaker 2: Well, we have a very healthy software division now and 88 00:05:03,920 --> 00:05:05,840 Speaker 2: we're very proud of it, and I did create it. 89 00:05:06,279 --> 00:05:08,800 Speaker 2: But we also we think of ourself primarily as a 90 00:05:08,800 --> 00:05:13,680 Speaker 2: bitcoin treasury company now, So our primary method of generating 91 00:05:13,760 --> 00:05:17,839 Speaker 2: shareholder value is through our treasury operations. And if you 92 00:05:17,839 --> 00:05:22,360 Speaker 2: think about there's three ways to create value for the shareholders. 93 00:05:22,600 --> 00:05:26,760 Speaker 2: There's operating income, and our software business generates about seventy 94 00:05:26,760 --> 00:05:29,839 Speaker 2: five million dollars a year of operating income. There's also 95 00:05:29,920 --> 00:05:34,160 Speaker 2: investment income that's been difficult to track, but right now 96 00:05:34,520 --> 00:05:40,120 Speaker 2: we have eighteen point six billion dollars of unrealized investment income. 97 00:05:40,720 --> 00:05:43,760 Speaker 2: People will start to get a better handle on that 98 00:05:43,800 --> 00:05:46,120 Speaker 2: when we switch to fair value accounting next year, and 99 00:05:46,160 --> 00:05:50,320 Speaker 2: then you'll actually see investment income captured in gap accounting. 100 00:05:51,000 --> 00:05:53,000 Speaker 2: And then the third way to create shareholder value is 101 00:05:53,040 --> 00:05:57,920 Speaker 2: acquisition income. So when Apple buys back its own stock, 102 00:05:58,960 --> 00:06:01,800 Speaker 2: or when Oracle m and A acquisitions, or when you 103 00:06:01,880 --> 00:06:06,360 Speaker 2: do an LBO, you're basically taking capital which is cheap 104 00:06:06,440 --> 00:06:09,120 Speaker 2: to buy a capital asset which is a higher return. 105 00:06:09,520 --> 00:06:14,240 Speaker 2: So micro strategy is engaged in that capital acquisition process. 106 00:06:14,279 --> 00:06:18,159 Speaker 2: We issue equity and debt, we buy bitcoin. That's resulted 107 00:06:18,160 --> 00:06:21,720 Speaker 2: in about a fourteen point four billion dollar benefit if 108 00:06:21,760 --> 00:06:24,520 Speaker 2: you value the bitcoin at one oh five for our 109 00:06:24,560 --> 00:06:28,200 Speaker 2: shareholders this year, and so we do all three of those. 110 00:06:28,360 --> 00:06:32,520 Speaker 2: Obviously the big numbers, the investment income the acquisition income 111 00:06:32,720 --> 00:06:35,560 Speaker 2: are more due to bitcoin treasury operations. 112 00:06:35,880 --> 00:06:38,279 Speaker 3: Well, I'm glad you bought up the accounting rules in 113 00:06:38,320 --> 00:06:42,960 Speaker 3: particular for this reason because obviously Nasdaq one hundred wondering 114 00:06:43,040 --> 00:06:45,919 Speaker 3: now with the rules around profitability for the S and 115 00:06:45,920 --> 00:06:49,000 Speaker 3: P five hundred inclusion, does that accounting rule get you 116 00:06:49,040 --> 00:06:51,159 Speaker 3: to the place where you think that the S and 117 00:06:51,200 --> 00:06:53,839 Speaker 3: P five hundred comes next for you? And how soon 118 00:06:53,839 --> 00:06:54,919 Speaker 3: do you think you can get there? 119 00:06:56,520 --> 00:07:00,040 Speaker 2: You know? I mean, obviously it's the decision to the 120 00:07:00,360 --> 00:07:03,000 Speaker 2: S and P five hundred is above my pay grade, 121 00:07:03,400 --> 00:07:08,360 Speaker 2: so they will make that decision. But I'm optimistic in 122 00:07:08,400 --> 00:07:12,920 Speaker 2: twenty twenty five, when we adopt fair value accounting, when 123 00:07:12,960 --> 00:07:15,960 Speaker 2: we end up with fifty billion dollars of assets on 124 00:07:16,000 --> 00:07:19,600 Speaker 2: our balance sheet under fair value of bitcoin goes up 125 00:07:19,640 --> 00:07:21,960 Speaker 2: twenty percent a year, you're looking at ten billion dollars 126 00:07:21,960 --> 00:07:24,800 Speaker 2: a year of investment income, So I expect we'll be 127 00:07:24,880 --> 00:07:28,200 Speaker 2: generating billions of dollars a year or tens of billions 128 00:07:28,240 --> 00:07:31,720 Speaker 2: of dollars a year of investment income, which becomes a 129 00:07:31,960 --> 00:07:35,680 Speaker 2: gap profitability. And I think that is the final thing 130 00:07:35,720 --> 00:07:38,760 Speaker 2: people are looking for for inclusion in the S and P. 131 00:07:39,080 --> 00:07:41,720 Speaker 1: And that would certainly be a sign of the times 132 00:07:41,720 --> 00:07:43,600 Speaker 1: if you did get included in the S and P 133 00:07:43,680 --> 00:07:45,640 Speaker 1: five hundred. So we'll have to keep in touch on 134 00:07:45,680 --> 00:07:47,080 Speaker 1: that one. But I want to go back to the 135 00:07:47,080 --> 00:07:49,640 Speaker 1: bitcoin buying and I want to talk about how you 136 00:07:49,720 --> 00:07:53,800 Speaker 1: actually purchase the bitcoin. Are you buying through an exchange 137 00:07:53,960 --> 00:07:57,080 Speaker 1: over the counter, peer to peer? This, of course is 138 00:07:57,120 --> 00:07:59,520 Speaker 1: made more interesting by the fact that obviously you're buying 139 00:07:59,520 --> 00:07:59,920 Speaker 1: in bold. 140 00:08:01,160 --> 00:08:06,400 Speaker 2: We use regulated exchanges in the United States like coinbase, 141 00:08:06,760 --> 00:08:11,280 Speaker 2: and when we're buying, we'll be buying on a simple 142 00:08:11,480 --> 00:08:14,720 Speaker 2: like t WAP algorithm. So our goal is to not 143 00:08:14,880 --> 00:08:17,880 Speaker 2: be noticed by the market, not to move the market. 144 00:08:18,360 --> 00:08:21,400 Speaker 2: If anything happens with a bitcoin price, or even with 145 00:08:21,440 --> 00:08:25,200 Speaker 2: the micro strategy price, it isn't us. Our objective is 146 00:08:25,360 --> 00:08:28,960 Speaker 2: to basically be market participants, but never move it up 147 00:08:29,040 --> 00:08:30,120 Speaker 2: or down or be noticed. 148 00:08:31,120 --> 00:08:32,960 Speaker 3: You know, it's interesting. I want to go back to 149 00:08:32,960 --> 00:08:35,760 Speaker 3: something Katie was talking about before in definitions here are 150 00:08:35,800 --> 00:08:38,520 Speaker 3: your software company or not? But when you think about 151 00:08:38,559 --> 00:08:41,959 Speaker 3: the legacy software business and micro strategy, what role does 152 00:08:42,000 --> 00:08:44,120 Speaker 3: it have, would you consider spinning it off? 153 00:08:46,120 --> 00:08:49,320 Speaker 2: No, we're very partial to it. We love the software business. 154 00:08:50,160 --> 00:08:52,920 Speaker 2: I invented a lot of a large piece of it. 155 00:08:53,000 --> 00:08:57,160 Speaker 2: We love our customers, we enjoy it, it's profitable, and 156 00:08:58,200 --> 00:08:59,920 Speaker 2: it's a core part of the company's ident. 157 00:09:00,640 --> 00:09:04,319 Speaker 1: All right, Well, we're worth asking anyway. I am curious 158 00:09:04,400 --> 00:09:07,920 Speaker 1: about you know, this unique treasury model that you have. 159 00:09:08,040 --> 00:09:11,040 Speaker 1: Obviously you've had great success at MicroStrategy with having a 160 00:09:11,040 --> 00:09:15,440 Speaker 1: bitcoin treasury. You recently pitched Microsoft though on investing in bitcoin. 161 00:09:15,480 --> 00:09:19,360 Speaker 1: That was rejected. But are you surprised that you haven't 162 00:09:19,360 --> 00:09:23,000 Speaker 1: seen more traditional companies follow your lead here and invest 163 00:09:23,000 --> 00:09:23,520 Speaker 1: in bitcoin. 164 00:09:25,120 --> 00:09:27,600 Speaker 2: I think Microsoft's are the great companies in the world, 165 00:09:27,679 --> 00:09:29,800 Speaker 2: so they don't really have a need to adopt a 166 00:09:29,840 --> 00:09:34,720 Speaker 2: new idea. But in essence, Microsoft strategies are to buy 167 00:09:34,720 --> 00:09:38,720 Speaker 2: their own stock back and to park short term cash 168 00:09:38,760 --> 00:09:42,800 Speaker 2: and treasuries, and then to pay out dividends. That's very conventional. 169 00:09:42,880 --> 00:09:46,560 Speaker 2: That's the finance playbook that would be taught at Harvard 170 00:09:46,640 --> 00:09:49,400 Speaker 2: Business Goal, and if you're a successful company with a 171 00:09:49,400 --> 00:09:52,000 Speaker 2: great business, you tend to stick with that playbook. The 172 00:09:52,040 --> 00:09:55,760 Speaker 2: playbook changed, really, it changed a few days ago when 173 00:09:55,800 --> 00:09:59,280 Speaker 2: fair value accounting became mandatory. You know, we go into 174 00:09:59,320 --> 00:10:02,559 Speaker 2: twenty twenty five, I expect you'll see I think you'll 175 00:10:02,600 --> 00:10:05,160 Speaker 2: see the repeal of SAB one twenty one. I think 176 00:10:05,200 --> 00:10:08,760 Speaker 2: you'll see fair value accounting. I think you'll see bitcoin 177 00:10:08,880 --> 00:10:12,160 Speaker 2: embrace as a digital commodity by the regulators. We already 178 00:10:12,200 --> 00:10:16,080 Speaker 2: can see the political wins are very favorably shifted. Now, 179 00:10:16,120 --> 00:10:19,360 Speaker 2: for the first time in one hundred years, large public 180 00:10:19,400 --> 00:10:23,880 Speaker 2: companies have a capital asset that they can consider in 181 00:10:24,000 --> 00:10:28,600 Speaker 2: lieu of treasury bills, and that's bitcoin. It doesn't make 182 00:10:28,640 --> 00:10:32,719 Speaker 2: sense to consider real estate, or gold, or paintings or 183 00:10:33,760 --> 00:10:36,800 Speaker 2: barrels of oil as a treasury asset. It does make 184 00:10:36,840 --> 00:10:40,360 Speaker 2: sense to consider bitcoin. So really, we're year one of 185 00:10:40,400 --> 00:10:43,280 Speaker 2: a new era, and I would think that the companies 186 00:10:43,280 --> 00:10:45,000 Speaker 2: that embrace it first are the ones that have a 187 00:10:45,120 --> 00:10:48,720 Speaker 2: need to know or they're very close to the bitcoin industry. 188 00:10:48,760 --> 00:10:53,120 Speaker 2: The digital assets industry, the Magnificent Seven. They'll embrace it 189 00:10:53,200 --> 00:10:55,760 Speaker 2: later because they don't need it now, all. 190 00:10:55,720 --> 00:10:57,600 Speaker 1: Right, Michael, that's a good place to leave it. Always 191 00:10:57,640 --> 00:11:00,360 Speaker 1: great to speak with you. That, of course, is Michael Sailor. 192 00:11:00,440 --> 00:11:03,120 Speaker 1: He is MicroStrategy chairman and co founder.