Bitcoin Treasury Hedge

A detailed look at Michael Saylor's strategy of converting MicroStrategy's corporate treasury into Bitcoin, using innovative financing approaches to accumulate a significant Bitcoin position.

Core Strategy Overview

• Converted initial $500M corporate cash to Bitcoin in 2020
• Currently holds over 210,000 Bitcoin (>1% of network)
• Total investment: $7.3B, current value: ~$15B
• Up 97% on total position

Financing Mechanisms

• Used convertible bonds to raise capital
  • Borrowed at very low interest rates (~0.1%)
  • Bonds convert to equity at premium to current price
  • Example: If company worth $10B, bonds convert at $15B
• Leveraged multiple funding sources
  • Initial corporate cash
  • Debt offerings through bonds
  • Equity sales when company valuation favorable
  • Used proceeds to continuously acquire more Bitcoin

Strategic Context

• Company background:

  • MicroStrategy - 20+ year old business analytics company
  • Stock was flat/declining from 2007-2020
  • Market valued company primarily for cash holdings
  • Needed strategy to create shareholder value

• Key drivers:

  • Concern about dollar devaluation
  • High inflation environment
  • Limited options for corporate cash deployment
  • Bitcoin viewed as best treasury reserve asset after analysis

Results & Impact

• Transformed company narrative and valuation
• Pioneered corporate treasury Bitcoin strategy
• Notable that no major companies have followed strategy
• Created new model combining:
  • Operating business generating cash
  • Bitcoin-focused treasury management
  • Creative financing approaches

Risk Considerations

• Extremely concentrated bet on single asset
• Significant leverage through convertible bonds
• Departure from traditional corporate treasury management
• Success heavily dependent on Bitcoin price appreciation
• Limited precedent for this approach