Why MicroStrategy Bought $40 Billion Worth of Bitcoin — ft. Michael Saylor | Prof G Markets

today's number $6.2 million that's how

much a crypto entrepreneur paid at a

soube auction for a banana taped to a

wall Ed what did the banana say to the

vibrator what why are you shaking she's

going to eat

[Music]

me how are you Ed it's time for banter

I'm doing pretty well how are you where

are you I have never seen this

background for you before I'm in the

guest room and our rental in bsize Park

which is a suburb of London which we are

moving out of back into our real home in

Marone oh okay which I'm hoping will

lift my mood from a 2 to a 3 because

I'll be near Marone High Street and I'll

get to walk and go to Grangers and go

get my coffee and go to teds and get

cleaned up but Caroline shagan the

producer on our other podcast said that

my room looked very very sad it does

look a bit sad it's it's very very plain

yeah I feel like you kind of like that

aesthetic though sort of no no

decorations sort of muted colors that's

sort of your Vibe right yeah I like

severely depressed northern European

architect that that's the look I'm going

for but why are you renting what's go

are you renovating what's going on cuz

[ __ ] you're not making enough money no

but why are you download why aren't you

at your Mall event place we uh so bought

it about when don't we buy it bought

about two and a half three years ago and

we've been renovating uh by the way just

so you know renovating it always comes

in under budget and on time it's just

such a a really pleasurable

experience um and plus the British

economy has just boomed so I'm sure I'm

going to make it just a [ __ ] ton of

money now we like buying homes and

fixing them up and enjoy furniture and

Renovations and it's a good way to make

money mostly in a booming real estate

market you know you start to believe

that it's you and you have some great

aesthetic but anyways we're moving back

and I'm super excited and it's across

the park because everything's about the

dogs now but do you know Marlo bone how

how knowledgeable are you on London yeah

I know malburn you lik it I I yeah I

like malburn pretty good it's sort of

the um it's sort of become the new the

new sexy burrow in London I would say

yeah that's cuz uh El senior dog Sone is

uh it's cuz his dog house is there right

now yeah I like it a lot I didn't I

didn't pick it Jesus this is fascinating

[ __ ] banter get to the

headlines oh it's the chemistry it's the

chemistry that makes this pod that's

right we like Joe and Ma if they weren't

having some yeah exactly let's get to

the

headlines Intel CEO Pat gilinger

resigned after the board expressed

doubts about his ability to turn around

the company the stock Rose more than 5%

when the news broke but then it ended

the day down.

5% president-elect Trump has threatened

the bricks nations with 100% tariffs

unless they commit to the US dollar as

their Reserve currency Trump is

demanding they abandon efforts to create

an alternative currency and pledge not

to back any other currency the Dollar

strengthened on that news and finally

you may remember that back in June we

discussed Tesla's shareholder vote on

Elon musk's $50 billion pay package well

here's an update on that story while the

shareholders did vote in favor of the

package for the second time a Delaware

judge upheld her decision to strike it

down so Scott your thoughts starting

with Pat Ginger's resignation as CEO of

Intel CEO's get unfairly compensated up

and down but after 4 years after I think

Revenue was down 30% absolutely deserves

to be fired and this would be an

interesting time to maybe be looking at

taking the company private uh their

largest shareholder is Vanguard with 9%

Black Rock at 8 and State Street at four

and a half so one of the complaints

people have about our economy is it's so

concentrated here you have

essentially um a small group of

shareholders that kind of controlled the

company can block it if

215% decided to vote together one way or

the other they kind of control it

because the way it works in a takeover

or a take private is it's like a an

election and that is the sharff show up

and they're supposed to have one vote

unless it's a two class voting structure

which I don't think this is and 20%

doesn't show up because it's under some

mattress or it's in a custodial

relationship and you know people just

don't show up or or fill out the form

and vote so about 80% shows up so to win

you need 40% and if you already have 21%

of the bag that means you just need to

get about 18 and a half of the remaining

um 60 to win which means you're probably

going to win so essentially these three

shareholders uh control any sort of take

private with Intel I'd be curious what

kind of Premium someone would need to

come up with but I love this as a take

private um Mr Ginger is going to be fine

I'm sure he had some sort of golden

parachute or made really good money uh

to rise to the CEO position at Intel he

is a very talented guy uh so he's going

to be he's going to be just fine uh this

is a great brand great relationships I

like this company a lot I'm actually

thinking about buying some shares in it

you have any thoughts um well he's done

a really terrible job just by the

numbers and we can go through them here

I mean last month Intel reported a $17

billion loss which is their largest ctly

loss in the company's history um a few

months before that he suspended the

dividend for the first time since 1992

he's cut 15% of the workforce or 130,000

employees and since he's taken over as

CEO Intel has lost three fifths of its

value which is just pretty remarkable

and in that same time the semiconductor

industry as a whole Which Intel is a

part of if we look at the semiconductor

index it has almost doubled so yeah it's

it's time um one data point that I found

kind of interesting here is that Ginger

is the 119th American public company CEO

to be pushed out of the company this

year and that is an alltime record so

119 CEOs Ed in 2024 that's up 3x from

2017 from the time that this has been

recorded this is the biggest year for

CEOs being pushed out and my question to

you is why do you think that's happening

a lot of this is simply the the

fatalities if you will of CEOs or CEOs

being out it it's time because coming

into the pandemic with $7 trillion in

stimulus it was a pretty good time to be

a CEO the stock market went crazy and

it's hard to fire a CO or you don't want

to fire a COO when your stock their

stock is up because everybody's making

money so what you had is this unnatural

sugar high and some of the underlying

revenues or the underlying businesses

couldn't support these unnatural

artificial sugar high of stock prices

the stocks have come down and when

shareholders and board members know

somebody or an investor in another

company that's like booming they're like

this [ __ ] sucks and how do people

take out their anger it's pretty simple

they vote them out of office so it's not

surprising that you're seeing record ton

over I think it's a good thing I think

we need more churn and I'm

especially I'm especially this isn't

going to get me on any more boards I

think there needs to be pretty harsh

review of CEOs cuz CEOs are

traditionally the fraternity or the

sority rush chairman they're usually

really likable people and they're

usually very smart at becoming friends

with the board members and I purposely

don't play golf with them I don't hang

out with them I'm like I don't want to

be a friend I want to be objective and

sober and be a fiduciary for

shareholders and on a every year I said

we need to do a review of the CEO

because these these guys and it's almost

always guys make so much [ __ ] money

and they have so much impact on all the

other stakeholders that you're really

you're kind of you only really have two

jobs as a as a board member when if and

when to sell the company and if and when

in kind of who you hire and fire the CEO

um that's kind of really your two things

now the chair of the audit committee is

there to make sure that nothing funny

goes on but those are really the only

two things the the board member should

do and I've always taken myself off of

boards after four years because you

can't help but be weaponized once you're

on a board for longer than four years by

the CEO let's move on to Trump and

this threat basically against the brics

Nations that he is going to put in 100%

tariff uh on Goods that they import and

just to clarify what are the brics

Nations it it technically stands for

Brazil Russia India China and South

Africa it now also includes Iran Egypt

Ethiopia and the UAE and it's sort of

just it's a it's a coalition of of

Nations who have talked in the past

about potentially creating their own

currency because they are so dependent

on the US dollar and I think what Trump

is really alluding to is a statement

that President Lula of Brazil made last

year where he pitched creating a new

Reserve currency for all of the bricks

Nations a bricks currency and the thing

that I think Trump is why I'm a little

confused by this the thing he's not

really recognizing is that no one really

took that proposal seriously at all I

mean most of the other bricks leaders

played it down I mean Putin obviously

would love for a brics currency because

he hates the fact that the US has this

sanction power over Russia but you know

most of the leaders were like no and the

markets barely reacted so it it is a

little strange that he's getting very

riled up about this issue

specifically um but perhaps you'll see

you see something else what are we we're

only about 5% of the population but

we're what we're almost 2third were 58%

of global Reserve currency now why is

that important basically to transact in

you have to come through a US

institution or you have to come through

one of our networks and we get to track

the flows of power we know where money's

going where it's coming we can more

easily impose sanctions we can stop

dollars from being transferred so and

also when you're doing business in

dollars you're kind of subject to our

decisions around interest rates the

dollar is really important so he has

that right but it's not as if it's under

threat and I would argue that no one

likes to be threatened and it's sort of

I have found generally speaking when you

threaten people especially powerful

people they're more inclined to do what

it is you don't want them to do yeah

it's like don't don't push this button I

didn't even know that button existed

yeah if you do this I'm going to do that

it's just sort of like the dollar is

doing really well on its own and when

you when you try and tell China the

second biggest economy India I don't

know whatever it is the fourth or the

fifth Brazil and war brazilla is but

together these these are a pretty big

group it feels to me all you're doing is

creating a reason for them to like go

back to the drawing board and actually

create another currency so I don't I I

just don't get this I think this is a

dumb move I think it's all Bluster

unnecessary Bluster to your point the

big inconsistency here what is if there

is a threat to the dollar and I don't

think there really is but if there is

one is it the bricks is it the euro is

it the Yuan probably not the biggest

threat if there is one is Bitcoin you

know that is the currency that has been

touted as the new Global Currency the

whole thing is predicated on issues of

rising inflation and spiraling debt and

ultimately the potential collapse of the

dollar that's sort of the whole point I

mean inherent to bitcoin is an

assumption that the dollar cannot hold

and so to protect yourself against that

collapse you buy Bitcoin instead so the

entire premise of Bitcoin is very anti-d

dollar and if Trump really cares about

this issue of dollarization and to be

clear I think he probably should then he

should really be taking another look at

his position on bitcoin because if

anything is threatening the dollar right

now or at least trying to threaten the

dollar I think it's that I mean there's

some weird things about a fiat currency

and Michael will talk about this every

fiat currency in history has ultimately

failed because the short-term political

pressure to feed your people and give

them back more than you're getting the

short term and print money and and give

into a populist movement and create huge

deficits that ultimately become no

longer sustainable or result in runaway

inflation and that basically the

currency you get the wart Republic and

the currency becomes you know kind of

useless every fiat currency has failed

and that's one of the arguments around

Bitcoin they claim that once we get to

21 million coins being mined we stop the

the currency trade Wars we're punching

well above our weight class and I don't

know do you have any data around whether

that 58% number has gone up or down

recently well I don't have dates in

front of me but what I can tell you is

that 60% is actually I mean a lot of

people say it's come down uh you know it

used to be around 75% Way Way Back In

sort of like the the early 1900s but it

it's also come up from the 80s it was

around 50% in the 80s it's now around

60% the USD as a percentage of Global

Currency Reserve so my issue with that

whole argument is people say you know

the dollar is losing power it's no

longer the world's Reserve currency it's

down from 75% it's like well it's also

it's also up from

50% let's move on to uh Elon and this

compensation package that was struck

down by Chancellor Kathleen McCormack

we've been discussing this story for a

long time now uh I actually made a

prediction about this back in June

I think what I can say with

certainty is that whether or not it's

yes or no this vote is basically

meaningless because here's what'll

happen if the vote is approved it'll go

back to the Delaware Court of Chancery

it'll go back to Chancellor McCormick

who will open up that briefing and she's

going to be like hold on I adjudicated

this case before actually I looked at

this case basically two months ago and I

made my decision very clear the answer

is no and I feel like what Tesla is

forgetting is that if you read her

opinion she actually didn't care whether

the shareholders were fully informed or

not you granted she said they probably

weren't but it had actually no bearing

on her actual decision you know she

believed that the package was

inequitable and that as a court of

equity she also believ that she had the

power to resend it and that was it and

now here we are again and we've got the

same case on her desk so nothing's going

to change here you not only got that

right I think I got it wrong I think I

disagreed with you and and you're like

listen listen to you old sad man what I

don't I'm mixed on this I think that I

don't think any individual I'm going to

sound very Bernie Sanders here I just

don't think any individual should be

worth a third of a trillion dollars I

don't see I don't see how that's healthy

you know uh power corrupts and absolute

power absolutely corrupts and I would

argue that musk is a case study and

absolute corruption having said that I

think the way you solve this is through

tax policy not by limiting compensation

and I do think of the shareholders is

the owners of an asset the company and

the owners of this company get to decide

what they pay the managers and it

strikes me that the owners have decided

here to pay the manager a hundred plus

billion dollars what she is claiming my

understanding is now is she's saying

there was faulty information in the

communications to the shareholders

before the vote I think this is

important to clarify here that was a

piece of the case she said I don't think

that the voters were fully informed on

what was happening but that wasn't the

main conclusion her main conclusion was

that $56 billion just made no sense

whether or not the shareholders believed

it and that's the part that I think

Tesla just I I some I think they didn't

even read the opinion because that was

my point that it's not about they

thought okay we'll revote and and we'll

prove to you that the shareholders were

informed her point is I don't care

whether they were informed or not this

just doesn't make sense the word I find

is a lack of veracity

or usage in a capitalist

society as it relates to compensation is

fair and her you know and I don't know

if this is her argument but basically an

argument might be he's not an

entrepreneur he doesn't own 50% of the

company he doesn't control it he's a

he's a he's management and there is some

there should be some reasonable kind of

fairness or equitability test but that's

for me where I run into trouble in that

is if the owners of the company have

approved this where what's the line in

Fair let me send you come over I'm going

to give you the compensation of a bunch

of CEOs and then come over and we'll

smoke cigarettes and eat ice cream and

talk about the meaning of the word fair

I mean it just to slightly steal man her

her

argument or I'll just say her argument

which is that he was pressuring the

board and the board was a board of

scants and that's definitely true and

ultimately the board decided to give him

a compensation package the likes of

which no one has ever seen before you

know and and they said that the reason

they're doing it is because they need to

properly incentivize him and her

argument was you don't need to properly

incentivize this guy he was already

incented so it is my opinion as a judge

in not a court of law but a court of

equity as as my uncle told us on this

podcast uh it is my job to to to discern

what is Equitable to shareholders and

even if they said yes we're okay with

this I do not believe that it is an

equitable uh compensation package and I

think the the thing that people are

struggling with is should the judge of

the Delaware Court of Chancery have that

power to determine what is fair and what

isn't fair and there's that word again

and in capitalism the owner of the asset

or the majority of the assets get to

nominate directors who get to decide

correctly or incorrectly the

compensation of the CEO and the moment

someone weighs in and starts using like

words like fair or unfair and overrides

the decisions of the people voted in by

the owners of the company to make these

decisions in my view you have government

overreach having said that a key

component of a healthy capitalist

Society is that we have an equitable

Fair taxation system to redistribute

Capital back into the middle class which

is not a naturally occurring organism

it's the greatest innovation in history

but it requires investment to ensure

that there aren't you know the one out

of three veterans aren't homeless to

ensure that people who do struggle with

opiates single parents pel grants the

Navy all these wonderful things that we

need that pay huge dividend investing in

DARPA and the internet which all these

huge companies have made billions from

not acknowledging or trilling from that

it was middle- class taxpayers that paid

for this [ __ ] you need a progressive tax

system and now we no longer do so what

would be my suggestion this isn't about

elon's compensation of 120 billion it's

about the following I believe anyone who

makes over a billion dollar should pay

60 70 80% Alternative Minimum Tax

because at the end of the day what do

you want why do we have all of this [ __ ]

why do we have capitalism the tax

structure governance the Delaware Court

you want to create a society where

people feel happy and rewarded and

healthy so I believe the equity and the

fairness part comes in around taxation

but if you start using the word fair and

compensation come over and I'm going to

tell you about the CEOs I deal with and

you tell me what is fair or not fair it

just that's an impossible [ __ ]

argument I just a prediction has come to

me I feel like this brings up very very

big questions about our legal system and

how our legal system should work I think

what we're going to see now is I mean

one we're going to see an appeal I think

we'll maybe see some pretty serious

lawsuits I would bet this makes its way

up to the Supreme Court and I would bet

that we see a Supreme Court decision or

Supreme Court lawsuit with scotus making

a decision on these sort of questions

but this is one of those situations

where you can begin to make a pretty

decent argument that the way our system

is set up gives government a little too

much power yeah but the mechanism here

is I don't think it's not like the

traditional court system this is but

then they'll take then they'll take it

to the traditional court system if they

don't win I mean he's going to get the

money he will find a way you think

eventually okay I I think that's a good

B he has to but just the mechanism here

is I believe they can appeal it once to

the Delaware Supreme Court I don't think

this this specific case won't end up in

the Supreme Court he would have to I

guess sue the Delaware

yes he'll file a new suit I think I I

think that is what will happen he'll

file a a a legal suit not with the court

of equity but the court of law and I

would bet that this makes its way up to

the Supreme Court also I think the way

around this actually Ed is I don't I I

think the board could figure out a way

shareholders have said we're down with a

100 plus billion dollar compensation I

think the board can figure out a way to

compensate him differently that will

avoid the Delaware Court I think there's

a rational argument and I don't I don't

know if you've picked up on this but I'm

not a huge fan of Elon Musk but there's

a rational argument that if you went to

Tim Cook right now and said okay we're

at three trillion if you can grow apple

to 20 trillion we'll give you a

trillion I think the shareholders of

Apple would say oh that's [ __ ] insane

a trillion dollars but sure we'll take

that deal if you can if you can increase

our stock price six or Sevenfold we'll

give you a trillion dollars and that's

kind of what musk and the board said to

shareholders I I I I just feels alien to

be supporting more money for Elon Musk

but I don't think I think they got it

wrong here I think boards are allowed to

make stupid decisions as long as they're

approved by the shareholders which it

they largely have been here and I agree

with you I think ultimately he ends up

getting his money we'll be right back

after the break for our conversation

with Michael sailor if you're enjoying

the show so far hit follow and leave us

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with Michael sailor the founder and

executive chairman of micro strategy

Michael thank you so much for joining us

on Prof G markets yeah happy to be here

You've Been Everywhere recently I mean

you're you're all over my news feed and

I just I just want to give sort of the

Michael sailor story in 2024 very

quickly so you're the founder and

chairman of micro strategy which was

originally a business intelligence firm

but over the past few years you've

shifted it into this Bitcoin treasury

company so micro strategy now ears

nearly $40 billion worth of bitcoin

that's roughly 2% of the total global

Bitcoin Supply and it also makes micro

strategy the largest corporate holder of

Bitcoin in the world and in the past

year as bitcoin's price has risen so too

has micro strategy so micro strategy

stock is up

600% over the past year it's just

remarkable so I'll start with this and

we'll get into it but what has drawn you

to bitcoin Michael and what was sort of

the impetus for this very radical pivot

at micro strategy towards Bitcoin I

think in the middle of uh 2000 the

summer of 2000 what Drew us to bitcoin

was desperation and

frustration so initially we had 500

million in cash it was uh worthless uh

like it was generating 0% interest the

company wasn't growing we were under

lockdowns competing against

Microsoft so you know the only thing

that we had in our world that was a

bright spot was we had 500 million in

cash and we thought maybe it was worth

something but when Jerome pal said it's

worthless for the next four years we

lost that you know so we had to do

something our initial you know for red

Bitcoin was Defensive or just

frustration defense it's either that or

sell the company so if if you're not

going to sell the company you can die

slowly you can die quickly or you can do

a transformational acquisition you can

take a risk and that was our

transformational acquisition what if you

could buy a $500 million company growing

60% a year which looks like its own

digital Monopoly and you could bolt it

on to a company that's growing not you

know zero to 5% a year that's not a

monopoly so we did that then Bitcoin

surged and we could

opportunistically uh raise money via the

convertible bond market and we raised

650 million at 75 basis points and then

we raised a billion paying 0% coupon and

that point I would say that state is

opportunistic like someone wants to give

you billions of dollars of free money to

actually invest in your business why

wouldn't you we got on the roller

coaster it went up and down it surged it

crashed it surged it crashed and uh I

think by the beginning of 2024 it became

uh strategic and we realized like hey

we're just doing this because we've got

an operating company and we can do it

and between 2021 and 2024 we we B raised

about $10

billion of capital so we started with

500 million we raised another 95 to 10

billion more and now and and now the

question is well what's going to happen

with crypto and what's going to happen

with Bitcoin and you got the ETFs

approved in January I mean 2024 is like

year zero of institutional adoption so

the ETFs are approved in January

everybody wrote us off and said well

micro strategy is unnecessary now what

they didn't realize is the ET f s are

like overnight deposits like you put

money into black rock but you can take

it out of Black Rock the next day micro

strategy that 40 billion that's our

money that's permanent you're not you

can't take it out we have 40 billion of

permanent capital and so what we realize

is our real great strategic um our

strategic franchise here is we can

securitize Bitcoin so I can issue fixed

income instruments bonds especially

bonds and fixed income preferred stocks

or or high volatility equity and those

are all products the Capital Market

wants they want Bitcoin back

Securities they either want 3x to trade

or they want onethird of the risk and

onethird of the volatility to hold in a

portfolio so we we announced October

30th uh that we were going to basically

raise 21 billion of equity in debt and

that was well received by our

shareholders we just kind of said we're

going to we're going to be the leader in

the industry if you want to invest in a

company like ours were the company and

then a week later we just had a red

sweep and November 5th was uh was Pro

crypto Congress Pro crypto Senate Pro

crypto White House Bitcoin surged our

stock surged and in uh and I guess I

boil it down to it took us uh four years

to get 10 billion but by way it took me

30 years to get 500 million it took me

four years to get the next 10 billion it

took us four weeks to raise 13 billion

more and uh and that's because the

product you're selling is capital I mean

you're selling a security if if if a

rich person looks at the iPhone how many

do you want one you want one Tesla one

iPhone but if I offer you a security

that gives you twice the performance of

the S&P how many of them do you want

like all until you hit your risk rail so

so now I would say we're a Bitcoin

treasury company right we our our

operation is we take crude crypto

Capital Bitcoin that's a commodity and

then we sell you uh an equity which is

like 2x Vol 2x Bitcoin and then we get

to 2x by actually selling bonds and

selling fixed income instruments that

are half X or or half of what we're

doing and we strip the performance and

the risk off the bottom of the capital

structure we put it onto the top and

that way all the all the degenerate

Traders get what they want and all of

the risk adversed investors get what

they want right and we're just the

institutional Gateway sitting in the

middle it sounds like the way that

you're describing this stock now it I

mean micro strategy was a a software

company the way you have described it it

sounds like micro strategy is a

financial product and the way that you

descri cribe that you are

securitizing Bitcoin which I would

assume you you see as maybe a

commodity um but it sounds like the the

business that micro strategy is in now

is it is selling a financial product

we're a treasury we're a treasury

company like we're we're not a retail

bank we don't have retail deposits what

we do is we issue

Securities we borrow billions of dollars

from the bond market

at 0%

interest and we lend it to the crypto

economy at 60% interest you see I bought

I raise money I I rais billions by

issuing Equity to the equity Capital

markets and I invested in Bitcoin and

the difference uh the difference between

them is a

spread um you know if I issue a billion

dollars of equity I'm capturing a 65%

spread we make $650 million on the

Arbitrage in one day in one day and then

when I do the bond market it's an 80%

spread so what we're doing is we're

taking cheap capital from the

traditional Capital markets of which

there's 300 trillion of it right there's

a lot of money in the capital markets

we're funneling that Capital into the

crypto economy into the decentralized

economy it's like I'm lending it to the

nation of Bitcoin but there's no

counterparty right because there's no

company there's no individual but I'm

getting back

60% return each year and so as long as I

can borrow the money for less if you can

borrow money for less than the S&P

return and if you can loan it out for

more than the S&P return you can rinse

and repeat that trade at infin item

because there's infinite money that's

getting less than the S&P that wants

more a lot of that is predicated on the

fact that you are borrowing money at 0%

interest which is very unusual

um could you take us through for our

listeners how that is possible okay

here's the big idea um the S&P

volatility is the vix it's about 15 The

Return of the S&P for the past four

years is about 15% annually so think of

the the cost of capital for every

traditional investor is 155 15v 15

ARR Bitcoin is 60 AR 60 all four times

the vix four times the S&P it's been

that way for a decade it's been that way

for the past four years okay if you're a

convertible arbitrager there's an entire

convertible bond market what they do is

they buy your bond and they sell your

equity and they extract the premium for

that TR there's a $340 billion Market

that does it for that trade to work they

need your Vault to be 45 or more so you

need to be three or 4X the S&P and of

course micro strategies got a of 100 to

15 and that's because we lever Bitcoin

which is a ball of 60 so if I take 60

and I double it I'm 120 so we have

extremely high volatility what else do

you need liquidity what else do you need

durability right Game Stops interesting

but it's not durable you see sometimes

there are meme stocks that are very

liquid and volatile but only for a week

what if I could volatility is like fire

I'm starting a fire I'm burning the fire

for a long time so the way we borrow

money for zero is we're selling a

convertible Bond and and the imputed

interest rate of the bond of course is

not zero the arbitragers are getting 20

30 40% risk-free yield they're betting

nothing and getting I mean they might

buy a $50 million Bond make $10 million

in a few minutes risk-free why wouldn't

you like so we're tapping that market

because we're we have a volatile liquid

stock that's

transparent but and it doesn't require

Vol uh it doesn't require a zero coupon

for this to work we borrowed money at 6%

if you borrow money at 6% and invested

at 60% you're still scraping 90% of the

game I'm still making 54% yield on

whatever I borrowed so it works at 6% it

works at 12 12% it works at 15% it just

happens that a very easy pull of capital

is convertible Bond Capital where you

can borrow the money at zero and you can

do it in size can I make one more point

which our our bonds are the most are the

most lucrative bonds sold in the last

decade right I mean the bonds all

doubled and tripled um no one ever

triples their money on a bond normally

but the other point is if a conventional

company borrows a billion dollars in the

convertible bond market and they go and

buy a build and they build a building or

they invest in a product or they fund an

operation it's a fiveyear investment

cycle and it's and it's not clear how it

will turn out so after five years of

developing a billion dollars of Chicago

real estate you go back to the Capital

Market borrow another billion and you

got to do it in San Francisco another

five years goes by but what we're doing

is building a digital building I borrow

a billion dollars I buy Bitcoin I

announce it two days later it's

immediately profitable because I'm

generating a yield to my common stock

shareholders so imagine I could borrow a

billion build a digital building in five

days announce that I made money on it

and borrow another billion I can do that

every week and that's exactly what's

happening in this market we're basically

accelerating the investment cycle from

uh from five years to one

week Bitcoin is the unique radical actor

here because Bitcoin is the first

product that's an a

commodity that's a legal definition an

asset without an issuer and it's

economically a scarcity that is a common

sense definition it's a commodity that

you could only make 21 million of for

the next billion years so there is no

legal commodity that's also a scarcity

other than Bitcoin and if you don't have

a commodity that's a scarcity you can't

do this with 100% of your cap capital in

a public company yeah like you can't do

this with a security like I couldn't do

this trade with Nvidia stock even though

it's a great company Nvidia stock is a

security so I could never Own 100% of my

liquid capital or hav it invested in

Nvidia so if you wanted to do this

before Bitcoin you had to do it with

gold soybeans oil or real estate and

they all underperform the S&P and they

all have less Vall than the S&P so if

your hurdle rate is 1515 and you're

showing me real estate which is

1010 the trade doesn't work and so what

we're doing is totally rational and

simple it's the simplest thing

imaginable if you accept the premise

that Bitcoin is a real asset that it is

a

commodity and then it's 21 million right

and once you once you get that

idea everything else follows naturally

and until you get that idea you just

think it's crazy magic so Michael it's

always good to see you and I should

point out the first time we had you on

the Pod you off mic said Scott just put

some of your assets in this trust me on

this and I think Bitcoin was like at

8,000 bucks and I'm like I'm going to

wait till it goes down to

4,000 um so I if if I understand this

correctly it's sort of this incredibly

deaf Capital markets Arbitrage where

you're able to issue zero coupon bonds

where no no cash FL leaves your balance

sheet you don't have to pay interest on

this so you get to borrow money not for

free but Cash Flow Free you're no cash

flow comes off your balance sheet and

because of bitcoin's acceleration and

the VA you talked about you're able to

issue the convert the price that the the

bonds convert out at a fairly high price

so you've essentially are engaging in

this kind of Arbitrage where people

think your company has the credibility

in the space you have the ability to

borrow against this but there has to be

underlying cash flows to support the

claim that those Bond holders might have

should Bitcoin go uh declined

substantially in price so is that

security built on just a pure belief in

Bitcoin or are the underlying cash flows

from your core business important to

that the performance of the underlying

asset is such that the bonds never get

paid back other than they just get they

get equitized and if you look at my

situation right now now I have about $40

billion of Bitcoin I have about7 billion

of bonds 4.2 of them are already Equity

I mean they're already effectively

Equity because they're trading not just

above the strike price they're trading

above the call Price which is 130% of

the strike price so we could you know

generally sometime in the future just

call them all for equity and equitise

them all so there's about $3 billion of

a convertible Bond on a $40 billion

structure which is zero coupon which

there's some theoretical risk that there

might be more delu than than uh the

minimum strike but the other point to

make is these are no recourse unsecured

notes there's no lean there's no claim

there's no ebit do covenants I think we

pay like 30 30 million 30 to 35 million

in interest on 7 billion in debt Scott a

year but I don't even have to generate

the cash flow for the 30 million I could

actually sell equity in order to pay the

30 million and we have we have raised

10.5 we've been generating a billion

dollars of equity a week I mean a

billion dollars of income and Equity a

week so the real magic of this is you

need an asset which is going to

outperform the S&P that's also going to

stay more volatile than the S&P and then

you need a company a public company

that's 100% Bitcoin

and when you sell Securities back by

Bitcoin you need to buy the Bitcoin with

it and and because you're actually

feeding back the uh Capital back into

the system it's like a triple

amplifier because it's driving up your

assets it's driving up your volatility

and it's driving up the price of Bitcoin

my understanding is there's no such

thing as risk-free return and I'm just

trying to paint out a doomsday or a

downside scenario here Bitcoin as you

reference is highly volatile a year ago

was 70% lower than it is now 5 years ago

was 90 or 95% lower volatility means it

goes way up it goes way down Bitcoin

goes to

$5,000 and the underlying value of your

Bitcoin Holdings no longer represents

the claim or the assets it once did your

stock goes way down it it is way below

the strike you have to issue massive

amounts of dilutive share price the

stock crashes and you're not able to

issue more debt isn't that the downside

scenario there may be more upside here

but there is a there is a doomsday right

well the best way to say it is the risk

that you're accepting is Bitcoin

Extinction

risk like if if Bitcoin goes to zero

tomorrow the entire business is a

Bitcoin Extinction risk so if you think

there's a x% chance of Bitcoin

Extinction then probably you don't put

100% of your portfolio into my stock or

into my bond right but what if it's

10,000 what if it goes to 10,000 what

happens I'm sure your Bankers have

modeled this out the answer is Bitcoin

goes to 10,000 the bonds are going to

pay off at par you know you might not

get three extra money on the bonds but

you're going to get your money back

because the company has enough assets

and enough equity that will just

equitise the bonds and it'll be deluded

to the common stock just press pause

there the business intelligence side of

the business creates enough cash flow to

support the bonds even if Bitcoin

declines dramatically no the point is

you don't need cash the bonds are free I

mean you don't need cash flow to pay the

interest if you're talking about the

principle the principle of the bonds

converts to equity right you're

basically paying out

Equity so the risk the risk if you

assume uh Bitcoin goes down 90% is to

the Equity it's the mstr right they're

the ones that are taking the risk the

bonds are going to pay off and and so

look Scott the point

is if you've got if you put a 100% of

all your wealth into our bonds or you

know or or into our equity and a Bitcoin

goes to zero then you will lose money

and you're not suggesting anyone does

that yeah and then if if you ask the

question well how does Micro strategy

look at it my answer is

I'm selling the volatility so for

example if if I sell a billion dollar

Bond I'm capturing an 80% spread up

front so I'm making $800 million in

Bitcoin if Bitcoin crashes by

80% then I I was neutral right so if

Bitcoin went to 20,000 tomorrow you

could say ha you know you didn't make

any money on that but if Bitcoin doesn't

crash 80% I made 800 million now if

Bitcoin goes down 20 or 30 or 40%

bitcoin's volatile my stock is twice as

volatile I'm going to refinance it and

sell the volatility and the theoretical

value of having a billion dollars a

volatile asset is like a 100 million a

year like like for example all I have to

do is hold the billion dollars and then

sell the ball and we probably make

another 500 million to a billion

dollarss even if Bitcoin doesn't go up

even if it goes down so right so so it's

it's a no-brainer for us as a

corporation because we're getting the

float and we're getting the volatility

and then we can equitise or refinance

the volatility between now and when it

comes due if you want me to say what's

the Doomsday scenario well it's it's

it's the same scenario you have Scott

which is if you walk out your door and

you get hit by a truck or a meteor

you're dead so it is possible you could

get hit by a meteorite and then you're

dead and it is possible for an

extinction level event to happen to

bitcoin a medeor and if it does

everything is definitely uh levered to

that but if it happens it needs to

happen quickly immediately like for

example a

Bitcoin if Bitcoin uh goes to zero

tomorrow