Bitcoin is the solution to the problems that plague Big Tech

Welcome back to Squawk on the Street.

Micro strategy holding its Bitcoin for corporations

virtual event that kicked off yesterday.

With Jack Dorsey making his first public appearance

and stepping down from Twitter as its CEO,

saying he remains bullish on Bitcoin.

Despite its rough start to the year,

well joining us now for a first on CNBC interview,

Michael Seller, Micro strategy chairman CEO

and founder Michael Grape to have you back on the show.

Yeah, thanks for having me.

All right, so let's talk a little bit about some of the headlines

that did come out of this conference

and specifically this discussion you had with Jack Dorsey.

A lot of very thought provoking commentary,

including this idea that Bitcoin is predictable and deliberate

and even slower moving perhaps than some other kinds

of crypto assets, which is why the both of you

prefer it over some of those other crypto assets.

Big picture around Bitcoin and what it means for businesses

like Square based on what Dorsey said yesterday

and also for Micro strategy.

Yeah, well, I think that the world's plagued

with an inflation problem.

The headlines last night were that Lebanese consumers

lost 93% of their wealth because of a currency devaluation.

The same's happened in Argentina, turkeys on the brink.

And the banks are going to freeze their assets

and they're going to hold them for many, many years.

There's no solution there.

And so the internet's also plagued by scammers,

spammers, surveillance problems and siops.

There were 398 Michael Seller Twitter bots spun up

in 30 minutes yesterday.

Big tech needs a solution, big finance needs solution.

There's billions of people that are on bank.

And so Jack's a man on a mission and his observation is

we need a digital property, which is open,

permissionless, fair, ethical.

And we can build on that base, especially if we use lightning

to move that value at the speed of light

everywhere in the world.

Yeah, I think he used the words very close

to the first native internet language

and how different business models might look

for example, social media companies

if something like Bitcoin had exist sooner.

This idea of emerging and overlapping

of payment systems and services out of company

like Square using Bitcoin.

How do those worlds emerge at Micro strategy?

Our view is we're going to run our enterprise software

business.

We had the best year in many, many years.

Our revenues are up 6% year over year.

Our cloud business is growing 39% year over year.

And we dropped 18% of our revenues

as free cash flow that we were able to use for debt service

and for acquiring more Bitcoin.

So the core business is healthy.

The Bitcoin strategy is to, of course,

reinvest our proceeds into Bitcoin

and we kind of view ourselves as we're

combining the efficiency of a zero fee spot ETF

with the yield and the cheap leverage

of an operating company without the competitive risk

to the Bitcoin miner.

So that's kind of a compelling offering

if you're a public market investor

and you're looking for Bitcoin exposure.

So it sounds like you're very much on board

with this idea at least from Wall Street

and investor standpoint of the stock being seen

as a bet on Bitcoin.

We definitely believe in Bitcoin

and we believe that Bitcoin's the most disruptive force

of the decade.

And so certainly our intention is to continue to acquire

and hold Bitcoin by any means that's a creative.

Okay.

So let's talk about near term right now,

which is the fact that you reported earnings last night,

stocks under pressure, net loss of $90 million

or $843 per share.

Street had actually been looking for profit of 89 cents.

And of course, this loss was largely tied

to the inclusion of impairment losses on Bitcoin

that more than offset the profit from your core software business.

I mean, walk us through the implications of that

as you continue to build out that core business.

And also as you said on the call last night,

look to acquire more Bitcoin.

Well, I think the most important numbers to focus on

are the revenue growth 6% up year over year,

the 18% free cash flow margin.

So we are generating a lot of cash.

We are growing our core business

and we've got 125,000 Bitcoin.

And I think our investors, they understand those numbers.

The indefinite, intangible accounting that we have

on our gap statements and the inclusion of the non cash

charges on our performance make it a little bit opaque

if you're using those conventional measures.

But if we've seen the price of Bitcoin fall

fell progeomatically in recent weeks.

We've got this fed tightening cycle.

If we see a prolonged down draft in the price of Bitcoin,

how much would that actually hinder

the micro strategy strategy?

We're very flexible here again.

We're generating free cash flow.

The soonest we have any debt coming due is December of 2025.

And it's a converted $398 a share.

So we don't really have any near term debt obligations.

We're very patient.

I think the Bitcoin is going to have a good decade.

And the big elephant in the room here

is there are billions of people in the world

that need digital property.

The big news of just the past few days

is fidelity coming out saying that Bitcoin

is the primary digital property

and there is no second best.

David Marcus, who had the DM initiative

has endorsed Bitcoin as the solution.

And you heard from Jack Dorsey yesterday,

there is one solution to the problem.

Billions of people have the problem.

It's going to take a little bit of time

for the world to sort itself out.

But we're not concerned about the near term volatility

in the markets.

Michael, you've been pretty upfront,

as you say, about communicating the Bitcoin strategy.

But the stock is the correlation

to Bitcoin's approaching one.

It's double the S&P software index.

Does it need to be reclassified

or do ratings agencies need to be notified

that this change in court,

this adjustment to corporate strategy

is changing the character of the company?

I think that we're the first Bitcoin-based operating company

out there and we're the largest public holder of Bitcoin.

So that makes us a bit of a unique creature.

And we're really just 18 months into this transformation.

Last year, we added two and a half billion dollars

of capital to our balance sheet.

And of course, we acquired a huge amount of Bitcoin.

I think 53,922 Bitcoin.

So the character of the company is evolving.

I think that industry watchers

are gonna catch up with us in time.

We just have to be patient.

Michael, it's David.

And always listening to you with great interest.

I'd love you to give a sense to our viewers

as the evolution that you see for Bitcoin at this point.

And what might be something they can focus on

as a seminal event, whether it be in the next year

or two years that you feel really will start to fully fill

in the vision you have?

Like the most important point is the big tech

and big finance and billions of people

around the world need a digital property solution.

We have a technically sound economic.

We sound morally sound, politically sound path forward

and that's Bitcoin.

I think people are starting to realize that now.

If you're looking for catalyst for more institutional adoption,

I think that an approval of a spot ETF would be a catalyst.

I think that if FASB converts the accounting treatment

to fair value accounting, that will be a catalyst.

I think that additional regulatory clarity

from the administration is going to benefit Bitcoin

and accelerate institutional adoption of that asset.

That's a catalyst.

What would that clarity be from the SEC, for example,

that you think would be beneficial?

I think the definition, a clear, bright line definitions

of digital property versus a digital security versus a digital currency

and the operating rules of a digital exchange.

I think that people understand broadly speaking,

that Bitcoin is common property.

It's not a security.

I think we're waiting for the operating rules of the road

for securities, for digital art, for digital exchanges,

for digital currency and there's a bit of ambiguity there right now.

Michael, will you raise more debt or issue more equity

to buy more Bitcoin?

I think we're going to continue to use cash flows to buy Bitcoin.

I think that if we see a creative opportunities

to do financing, a creative debt financing,

we'll consider them.

I think we'll consider other equity linked financing

if we believe they're a creative.

As you know, the markets fluctuate and so sometimes they are

and sometimes they are not.

And I think we're open to other partnerships

that might generate yield.

We don't have any specific plans right now,

but it's very important that our shareholders know

we have 110,000 Bitcoin that's unpleashed as collateral.

That's a big asset base.

And as an operating company, we have the opportunity

to use that asset base if we think

that it is in the past centers of the shareholders.