Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Micro Strategy still buying
Speaker 1: bitcoin amid the tokens record run. It's bought the digital
Speaker 1: currency for six straight weeks, bringing its total haul to
Speaker 1: forty five billion dollars. That's all before micro Strategy joins
Speaker 1: the Nasdaq one hundred index next week. Now, the company's
Speaker 1: share price is outperforming bitcoin itself this year, as retail
Speaker 1: traders and hedge funds pile in and capitalize on the volatility.
Speaker 1: I'm pleased to say that we're joined now by MicroStrategy
Speaker 1: co founder and executive chairman Michael Sailor, And of course
Speaker 1: we're going to get to the bitcoin purchases, but I
Speaker 1: actually want to start with the politics of it all,
Speaker 1: because you've been relatively less vocal than some of your
Speaker 1: peers in the crypto community about your political views, and
Speaker 1: I have to ask, have you met with President elect
Speaker 1: Donald Trump.
Speaker 2: I've met with a lot of people in the incoming administration,
Speaker 2: but I couldn't comment further than that.
Speaker 1: Okay, I can't comment further than that. I was going
Speaker 1: to ask you about plans, but instead I'll ask you
Speaker 1: about whether or not you would be willing to serve
Speaker 1: in the Trump administration in any capacity. Bloomberg has reported
Speaker 1: that there potentially could be a crypto advisory council. Is
Speaker 1: that something that you might be interested in?
Speaker 2: You know, I'm always willing to provide, you know, thoughts
Speaker 2: on constructive digital assets policy, either in confidence or publicly,
Speaker 2: and if I'm asked to serve on some sort of
Speaker 2: digital assets advisory counseling, probably would do so.
Speaker 3: Yes, Michael, I also want to talk to you about
Speaker 3: micro strategy, your own plans. It's amazing you have announced
Speaker 3: plans to raise forty two billion dollars over three years.
Speaker 3: You announced that back in October. But the rate you're
Speaker 3: going at, and this is through convertable debt offerings as
Speaker 3: stock sales, the rate you're going at, you could fulfill
Speaker 3: that target by January. Are you planning to lift that
Speaker 3: cap and line up more facilities in the pursuit of
Speaker 3: more bitcoin.
Speaker 2: Yeah. When we announced that, it wasn't clear how enthusiastic
Speaker 2: the capital markets would be, but we got a very
Speaker 2: enthusiastic reception. And then after November fifth, with the Red Wave,
Speaker 2: we saw a big sea change in the political environment,
Speaker 2: and so we went faster than we had thought we
Speaker 2: were going to go on October thirtieth. Our goal is
Speaker 2: to is to continue to raise capital primarily through fixed
Speaker 2: income markets. So we'll pursue preferred stock or convertible bond
Speaker 2: or other equity linked financings as long as it's creative
Speaker 2: for our shareholders. When we get through the twenty twenty
Speaker 2: one plan, which is forty two billion in capital, we'll revisit,
Speaker 2: revisit our capital plan, and we'll put in place a
Speaker 2: new plan, subject to market conditions at the time.
Speaker 1: All right, So we'll look forward to that. I am curious,
Speaker 1: you know, with what you've raised so far. It seems
Speaker 1: like you've been tapping the market facility more so than
Speaker 1: converts in order to raise cash, and I'm wondering if
Speaker 1: there's anything to read into that.
Speaker 2: Well, just the equity capital markets were very enthusiastic over
Speaker 2: the past four weeks, and so we're always considering, is
Speaker 2: that the convertible market, is it the fixed income market?
Speaker 2: Is it the equity market we want to go to?
Speaker 2: And that's going to change from time to time. I
Speaker 2: expect that that MAX will shift more heavily toward fixed
Speaker 2: income markets in Q one as we go forward, because
Speaker 2: right now we're probably getting a little bit too de levered,
Speaker 2: and we'd like to actually get more leverage. We have
Speaker 2: about seven point two billion dollars of converts, but four
Speaker 2: billion of the mariority essentially equity. They're through the strike price,
Speaker 2: they're through the call price, and they're trading with a
Speaker 2: delta approximately one hundred percent, So they're looking like equity,
Speaker 2: and so we would like to go back and build
Speaker 2: more intelligent leverage for the benefit of our common stock shareholders.
Speaker 3: Yeah, speaking of common stock, of course, one of the
Speaker 3: big pieces of news is Kitty had talked about was
Speaker 3: your index inclusion and the NASDAQ one hundred and one.
Speaker 3: Big question is would you or are you selling newly
Speaker 3: issued stock to index trackers? Is equity something that you'd
Speaker 3: be looking to add to instead.
Speaker 2: You know, when we execute THEATM, we just sell equity
Speaker 2: into the market. If we like the price and we
Speaker 2: like the terms, and if we think that the equity
Speaker 2: is undervalued, we don't, but we don't specify any particular buyer.
Speaker 2: I think that's just a parapursue to every other investor
Speaker 2: in the market.
Speaker 1: So I want to get a little bit philosophical, because
Speaker 1: you know, we're talking now about Nasdaq one hundred inclusion
Speaker 1: and you're joining, of course, because MicroStrategy is nominally a
Speaker 1: software company. You founded it in nineteen eighty nine as
Speaker 1: a software company. Do you still consider MicroStrategy a software company.
Speaker 2: Well, we have a very healthy software division now and
Speaker 2: we're very proud of it, and I did create it.
Speaker 2: But we also we think of ourself primarily as a
Speaker 2: bitcoin treasury company now, So our primary method of generating
Speaker 2: shareholder value is through our treasury operations. And if you
Speaker 2: think about there's three ways to create value for the shareholders.
Speaker 2: There's operating income, and our software business generates about seventy
Speaker 2: five million dollars a year of operating income. There's also
Speaker 2: investment income that's been difficult to track, but right now
Speaker 2: we have eighteen point six billion dollars of unrealized investment income.
Speaker 2: People will start to get a better handle on that
Speaker 2: when we switch to fair value accounting next year, and
Speaker 2: then you'll actually see investment income captured in gap accounting.
Speaker 2: And then the third way to create shareholder value is
Speaker 2: acquisition income. So when Apple buys back its own stock,
Speaker 2: or when Oracle m and A acquisitions, or when you
Speaker 2: do an LBO, you're basically taking capital which is cheap
Speaker 2: to buy a capital asset which is a higher return.
Speaker 2: So micro strategy is engaged in that capital acquisition process.
Speaker 2: We issue equity and debt, we buy bitcoin. That's resulted
Speaker 2: in about a fourteen point four billion dollar benefit if
Speaker 2: you value the bitcoin at one oh five for our
Speaker 2: shareholders this year, and so we do all three of those.
Speaker 2: Obviously the big numbers, the investment income the acquisition income
Speaker 2: are more due to bitcoin treasury operations.
Speaker 3: Well, I'm glad you bought up the accounting rules in
Speaker 3: particular for this reason because obviously Nasdaq one hundred wondering
Speaker 3: now with the rules around profitability for the S and
Speaker 3: P five hundred inclusion, does that accounting rule get you
Speaker 3: to the place where you think that the S and
Speaker 3: P five hundred comes next for you? And how soon
Speaker 3: do you think you can get there?
Speaker 2: You know? I mean, obviously it's the decision to the
Speaker 2: S and P five hundred is above my pay grade,
Speaker 2: so they will make that decision. But I'm optimistic in
Speaker 2: twenty twenty five, when we adopt fair value accounting, when
Speaker 2: we end up with fifty billion dollars of assets on
Speaker 2: our balance sheet under fair value of bitcoin goes up
Speaker 2: twenty percent a year, you're looking at ten billion dollars
Speaker 2: a year of investment income, So I expect we'll be
Speaker 2: generating billions of dollars a year or tens of billions
Speaker 2: of dollars a year of investment income, which becomes a
Speaker 2: gap profitability. And I think that is the final thing
Speaker 2: people are looking for for inclusion in the S and P.
Speaker 1: And that would certainly be a sign of the times
Speaker 1: if you did get included in the S and P
Speaker 1: five hundred. So we'll have to keep in touch on
Speaker 1: that one. But I want to go back to the
Speaker 1: bitcoin buying and I want to talk about how you
Speaker 1: actually purchase the bitcoin. Are you buying through an exchange
Speaker 1: over the counter, peer to peer? This, of course is
Speaker 1: made more interesting by the fact that obviously you're buying
Speaker 1: in bold.
Speaker 2: We use regulated exchanges in the United States like coinbase,
Speaker 2: and when we're buying, we'll be buying on a simple
Speaker 2: like t WAP algorithm. So our goal is to not
Speaker 2: be noticed by the market, not to move the market.
Speaker 2: If anything happens with a bitcoin price, or even with
Speaker 2: the micro strategy price, it isn't us. Our objective is
Speaker 2: to basically be market participants, but never move it up
Speaker 2: or down or be noticed.
Speaker 3: You know, it's interesting. I want to go back to
Speaker 3: something Katie was talking about before in definitions here are
Speaker 3: your software company or not? But when you think about
Speaker 3: the legacy software business and micro strategy, what role does
Speaker 3: it have, would you consider spinning it off?
Speaker 2: No, we're very partial to it. We love the software business.
Speaker 2: I invented a lot of a large piece of it.
Speaker 2: We love our customers, we enjoy it, it's profitable, and
Speaker 2: it's a core part of the company's ident.
Speaker 1: All right, Well, we're worth asking anyway. I am curious
Speaker 1: about you know, this unique treasury model that you have.
Speaker 1: Obviously you've had great success at MicroStrategy with having a
Speaker 1: bitcoin treasury. You recently pitched Microsoft though on investing in bitcoin.
Speaker 1: That was rejected. But are you surprised that you haven't
Speaker 1: seen more traditional companies follow your lead here and invest
Speaker 1: in bitcoin.
Speaker 2: I think Microsoft's are the great companies in the world,
Speaker 2: so they don't really have a need to adopt a
Speaker 2: new idea. But in essence, Microsoft strategies are to buy
Speaker 2: their own stock back and to park short term cash
Speaker 2: and treasuries, and then to pay out dividends. That's very conventional.
Speaker 2: That's the finance playbook that would be taught at Harvard
Speaker 2: Business Goal, and if you're a successful company with a
Speaker 2: great business, you tend to stick with that playbook. The
Speaker 2: playbook changed, really, it changed a few days ago when
Speaker 2: fair value accounting became mandatory. You know, we go into
Speaker 2: twenty twenty five, I expect you'll see I think you'll
Speaker 2: see the repeal of SAB one twenty one. I think
Speaker 2: you'll see fair value accounting. I think you'll see bitcoin
Speaker 2: embrace as a digital commodity by the regulators. We already
Speaker 2: can see the political wins are very favorably shifted. Now,
Speaker 2: for the first time in one hundred years, large public
Speaker 2: companies have a capital asset that they can consider in
Speaker 2: lieu of treasury bills, and that's bitcoin. It doesn't make
Speaker 2: sense to consider real estate, or gold, or paintings or
Speaker 2: barrels of oil as a treasury asset. It does make
Speaker 2: sense to consider bitcoin. So really, we're year one of
Speaker 2: a new era, and I would think that the companies
Speaker 2: that embrace it first are the ones that have a
Speaker 2: need to know or they're very close to the bitcoin industry.
Speaker 2: The digital assets industry, the Magnificent Seven. They'll embrace it
Speaker 2: later because they don't need it now, all.
Speaker 1: Right, Michael, that's a good place to leave it. Always
Speaker 1: great to speak with you. That, of course, is Michael Sailor.
Speaker 1: He is MicroStrategy chairman and co founder.