Billion-dollar software firm MicroStrategy eyes big Bitcoin buy

Not only are individual investors flocking to Bitcoin as a store of value during a time of economic uncertainty, but so too are companies—and a rather large and publicly-traded one just signaled that a potentially massive BitcoinBitcoin buy could be in its future.

During an earnings call last week, leadership for business intelligence software firm MicroStrategy announced that they plan to invest up to $250 million in alternative assets in the next 12 months, and specifically called out Bitcoin as one of the key options they’re considering.

“We will seek to invest up to another $250 million over the next 12 months in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as Bitcoin, or other asset types,” said MicroStrategy President and CFO Phong Le, according to a transcript from The Motley Fool (via Castle Island Ventures partner Matt Walsh).

Despite categorizing the firm’s second quarter results as merely “solid,” noting the continued impact of the global COVID-19 pandemic, the 31-year-old company (which trades under “MSTR” on NASDAQ) is apparently in a good position to be spending some money.

MicroStrategy—which has a market cap of $1 billion—has returned $245 million to investors since Q4 2018 by repurchasing 1.8 million shares, and announced plans last week to spend up to another $250 million on further buybacks. That’s separate from the potential $250 million it plans to invest in alternative assets.

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Why alternative assets, though? MicroStrategy Chairman and CEO Michael Saylor explained the company’s position later in the call, and it has to do with declining value for the US dollar amidst American monetary stimulus and low interest rates throughout the West.

“We have a large amount of USD on our balance sheet and we have carried that for a while,” said Saylor. “Over time, the yield on our dollar values has decreased and at points, we had an expectation that we would get higher real yields, and therefore, there was no real urgency to address this issue. But as of today, we're expecting negative real returns or a negative real yield on U.S. dollars, and that's an expectation that has materially changed over the course of the last three months.”

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Old vs. new, physical vs. digital—these are well-established differences in the debate over whether gold or Bitcoin is a better store of value. Given that, it’s not too much of a surprise that the age of investors may also be driving investment strategies right now. According to a new JPMorgan Chase & Co. report released this week and cited by Bloomberg, investors on the whole are looking to alternative assets during the pandemic and the economic uncertainty that has ensued. While older investor...

“If you have large dollar values and you're hoping for any kind of return on them, that's faded,” he added. “Gold, silver, and bitcoin are showing strength.”

MicroStrategy didn’t elaborate further on the opportunity for Bitcoin versus more traditional stores of value. Still, the fact that a publicly-traded company has stated interest in investing in cryptocurrencycryptocurrency—as opposed to holding fiat currency—could signal to other companies that Bitcoin can be a reasonable and potentially very profitable option to hold on a large scale.