Review Of MSTR Capital Markets Strategy And More

We welcome now our Bloomberg TV and radio audiences and

MicroStrategy still buying Bitcoin amid the tokens record run.

It's bought the digital currency for six straight weeks,

bringing its total haul to $45 billion.

That's all before MicroStrategy joins the NASDAQ 100 index next week.

Now the company's share price is outperforming Bitcoin itself this year as

retail traders and hedge funds pile in and capitalize on the volatility.

I'm pleased to say that we're joined now by MicroStrategy co-founder and executive

chairman Michael Sailor and of course we're going to get to the Bitcoin

purchases but I actually want to start with the politics of it all because

you've been relatively less vocal than some of your peers in the crypto

community about your political views and I have to ask have you met with

President-elect Donald Trump?

I've met with a lot of people in the incoming administration but I couldn't

comment further than that.

Okay, I can't comment further than that. I was going to ask you about plans but

instead I'll ask you about whether or not you would be willing to serve in the

Trump administration in any capacity. Bloomberg has reported that

there potentially could be a crypto advisory council.

Is that something that you might be interested in?

You know I'm always willing to provide you know

thoughts on on constructive digital assets policy either in confidence

or publicly and if I'm asked to serve on some sort of digital assets advisory

council I probably would do so yes. Michael I also want to talk to you about

MicroStrategy your own plans. It's amazing you have announced plans to raise

42 billion dollars over three years you announced that back in October

but the rate you're going at and this is through convertible debt offerings

stock sales the rate you're going at you could fulfill that target by

January. Are you planning to lift that cap and line up more facilities in the

pursuit of more Bitcoin?

Yeah well we announced that it wasn't clear how enthusiastic the capital

markets would be but we got a very enthusiastic reception and then after

November 5th with the red wave we saw a big sea change in the

political environment and so we went faster than we had thought we were

going to go on October 30th. Our goal is to is to continue to

raise capital primarily through fixed income markets so we'll pursue

preferred stock or convertible bond or or other equity linked

financing as long as it's creative for our shareholders.

When we get through the 21 21 plan which is 42 billion in capital

we'll revisit our capital plan and we'll put in place a new plan subject to

market conditions at the time. All right so we'll look forward to that I am

curious you know with what you've raised so far it seems like you've been

tapping the market facility more so than converts

in order to raise cash and I'm wondering if there's anything to read into

that. Well just the the equity capital markets

were very enthusiastic over the past four weeks and so

we're always considering is that the convertible market is at the fixed

income market is at the equity market we want to go to and that's going to

change from time to time. I expect that that mix will shift

more heavily towards fixed income markets and Q1

as we go forward because right now we're probably getting a little bit too

delivered and we'd like to actually get more leverage. We have about

$7.2 billion of converts but four billion of the majority essentially

equity they're through the strike price they're through the call price

and they're trading with a delta approximately 100% so they're looking like

equity and and so we would like to go back and and build more

intelligent leverage for the benefit of our common stock shareholders.

Yeah speaking of common stock of course one of the big pieces of New

Kansas Katie has talked about was your index inclusion and then that's

stock 100 and one big question is would you or are you selling newly issued

stock to index trackers is equity something that you'd be looking to add to

instead. You know when we execute the the ATM

we just sell equity into the market if we like the price and we like the terms

and if we think that the equity is undervalued we don't

but we don't specify any particular buy or I think that's just a

parapassue to every other investor in the market. So I want to get a little bit

philosophical because you know we're talking now about NASDAQ 100

inclusion and you're joining of course because

microstragie is normally a software company you founded it in 1989 as a

software company. Do you still consider microstragie a software company?

Well we have a very healthy software division now and we're very proud of it

and I did create it but we also we think of ourselves primarily as a Bitcoin

Treasury company now so our primary method of generating shareholder value is

through our Treasury operations and and if you think about there's three ways

to create value for the shareholders there's operating income and our

software business generates about 75 million dollars a year of operating

there's also investment income that's been difficult to track but right now

and we have 18.6 billion dollars of unrealized investment income people will

start to get a better handle on that when we switch to fair value accounting

next year and then you'll actually see investment income captured in gap

accounting and then the third way to create shareholder value is acquisition

so when Apple buys back its own stock or when Oracle does M&A acquisitions or when you do an LBO

you're basically taking capital which is cheap to buy a capital asset which is a higher return

so microstragie is engaged in that capital acquisition process we issue equity and debt we buy

Bitcoin that's resulted in about a 14.4 billion dollar benefit if you value the Bitcoin

at 105 for our shareholders this year and so we do all three of those obviously the big numbers

the investment income the acquisition income are more due to Bitcoin Treasury operations

well I'm glad you bought up the accounting rules in particular for this reason because obviously

NASDAQ 100 wondering now with the rules around profitability for the S&P 500 inclusion does that

accounting will get you to the place where you think that the S&P 500 comes next for you

and how soon do you think you can get there you know I mean obviously it's the decision to enter

the S&P 500 is above my pay grade so they they will make that decision but I'm optimistic in 2025

when we adopt fair value accounting when we end up with 50 billion dollars of assets on our balance

sheet under fair value of Bitcoin goes up 20% a year you're looking at 10 billion dollars a year

of investment income so I expect we'll be generating billions of dollars a year or tens of billions

of dollars a year of investment income which becomes a gap profitability and I think that is

the final thing people are looking for for inclusion in the S&P and that would certainly be a

sign of the times if you did get included in the S&P 500 so we'll have to keep in touch on that one

but I want to go back to the Bitcoin buying and I want to talk about how you actually purchase

the Bitcoin are you buying through an exchange or the counter peer to peer this of course

is made more interesting by the fact that obviously you're buying in bulk we use regulated

exchanges in the United States like Coinbase and when we're buying we'll be buying

you know and on a simple like T-Wap algorithm so our goal is to not be noticed by the

market not to move the market if anything happens with the Bitcoin price or even with the

micro strategy price it isn't us our objective is to basically be market participants but never

move it up or down or be noticed you know it's interesting I want to go back to something Katie was

talking about before in definitions here or your software company or not but when you think about

the legacy software business and micro strategy what role does it have would you consider spinning it

off no we're very partial to it we love the software business I invented a lot of a large piece of

it we love our customers we enjoy it it's profitable and and it's a core part of the company's

identity all right well we're worth asking anyway I am curious about you know this unique treasury

model that you have obviously you've had great success at micro strategy with having a Bitcoin

treasury you recently pitched Microsoft though on investing in Bitcoin that was rejected but

are you surprised that you haven't seen more traditional companies follow your lead here and invest in

Bitcoin I think Microsoft's one of the great companies in the world so they don't really have a

need to adopt a new idea but in essence Microsoft strategies are to buy their own stock back

and to park short-term cash and treasuries and then to pay out dividends that's very

conventional that's the finance playbook that would be taught at Harvard Business School and if

you're a successful company with a great business you tend to stick with that playbook the playbook

changed really it changed a few days ago when fair value accounting became mandatory you know

we're going to 2025 I expect you'll see I think you'll see the repeal of SAB-121 I think you'll

see fair value accounting I think you'll see Bitcoin embrace as a digital commodity by the regulators

we already can see the political wins are very favorably shifted now for the first time in a hundred

years large public companies have a capital asset that they can consider in lieu of treasury bills

and that's Bitcoin it doesn't make sense to consider real estate or gold or paintings or

or barrels of oil as a treasury asset it does make sense to consider Bitcoin so really we're year one

of a new era and I would think that the companies that embrace it first are the ones that have a need

to know or they're very close to the Bitcoin industry the digital assets industry the magnificent

seven they'll embrace it later because they don't need it now all right Michael that's a good place

to leave it always great to speak with you that of course is Michael Saylor he is microstragy

chairman and co-founder