At the heart of MicroStrategy Inc.’s strategy lies an aggressive push towards Bitcoin (BTC) accumulation, masterminded by its co-founder and chairman, Michael Saylor. With a shareholder vote scheduled for Jan. 21, the company is poised to significantly expand its share authorization from 330 million to 10.3 billion Class A common shares. This move, as noted by a Bloomberg report, would position MicroStrategy (MSTR) with more shares potentially outstanding than many of the tech giants in the Nasdaq 100 Index (NDX), excluding Nvidia (NVDA), Apple (AAPL), Alphabet (GOOGLE, GOOG), and Amazon (AMZN).
Saylor’s control over approximately 47% of the voting power through Class B shares ensures that this proposal is likely to pass, giving MicroStrategy a vast arsenal of shares to fuel its Bitcoin acquisition strategy. Since announcing its $42 billion capital-raising plan in October to buy Bitcoin over three years, MicroStrategy has nearly doubled its Bitcoin holdings to over $44 billion, leveraging both equity and debt markets. It has accomplished this through ten consecutive weekly purchases, showcasing an unwavering commitment to its cryptocurrency strategy.
Bloomberg notes that generally, such a dramatic increase in share count would be met with investor skepticism due to the dilution of earnings per share, shareholder equity, and voting rights. However, MicroStrategy’s case is unique. The company’s stock has soared by more than 2,500% since it began its Bitcoin strategy in 2020, outpacing Bitcoin’s own rally of nearly 800%. This has turned MicroStrategy into a Wall Street favorite, with investors seemingly more focused on the potential for continued Bitcoin value growth than on dilution effects.
The gap between shares authorized and those actually issued can be substantial, as seen with tech behemoths like Alphabet and Nvidia. MicroStrategy’s plan to authorize over 10 billion shares doesn’t mean they will all be sold immediately, but it provides a buffer for future financial maneuvers. To date, only just over 43 million additional shares have been issued through at-the-market sales since the plan’s inception.
Further complicating the shareholder dynamics, Class A shareholders have minimal power compared to Class B, which Saylor almost entirely controls. This imbalance will become even more pronounced with the planned issuance of up to $2 billion in perpetual preferred stock, which will rank senior to Class A shares. Additionally, the vote on Jan. 21 will address increasing the number of authorized preferred shares from 5 million to 1.005 billion, broadening MicroStrategy’s financial strategy options.
MicroStrategy’s approach to measuring success through its proprietary “Bitcoin yield” metric, which tracks the increase in Bitcoin per diluted share, underscores its focus on Bitcoin’s value rather than traditional financial metrics like dividends, which it does not pay.
However, this strategy is not without its critics. Michael Lebowitz from RIA Advisors told B’berg that while such a massive share increase is unprecedented, it might reduce the leverage that has made MicroStrategy attractive, potentially altering investor perception of the company’s risk profile. The company’s underlying software business has reported losses, limiting its traditional revenue streams and making it heavily reliant on its Bitcoin strategy for growth.
Saylor has expressed intentions to maintain or increase “intelligent leverage,” suggesting a nuanced approach to balancing equity and debt to continue driving Bitcoin acquisitions. For the amendments to pass, they require a majority vote from the holders of all outstanding common stock, reflecting the democratic, yet heavily Saylor-influenced, decision-making process at MicroStrategy.
This strategic pivot by MicroStrategy under Saylor’s guidance represents not just a financial maneuver but a bold statement on the future of corporate finance intertwined with digital assets.
Price Action: As of press time, MSTR is changing hands at $391.32, up $24.37 or 6.64% intraday.
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