MicroStrategy CEO defends debt-financed bitcoin buys, compares it to investing early in Facebook

Investing

MicroStrategy CEO Michael Saylor on Friday defended his enterprise software company’s debt-financed purchases of bitcoin, telling CNBC he sees buying the cryptocurrency right now as comparable to investing in Facebook in the social network’s early days.

“We’ve got $2.2 billion of debt and we pay about 1.5% interest, and we have a very long time horizon,” Saylor said on “Squawk on the Street.” “Our point of view is being a leveraged, bitcoin-long company is a good thing for our shareholders.”

MicroStrategy has become well-known on Wall Street in the past year after the Virginia-based company started to buy and hold bitcoin, initially using cash on its balance sheet to acquire the digital tokens before turning to the debt market to make more purchases. Saylor’s own profile has soared as the executive evangelized about what he feels is bitcoin’s grand potential, likening it to “digital real estate.”

Some people are highly skeptical of MicroStrategy’s bitcoin bet, concerns that have only been amplified in recent months as the world’s largest cryptocurrency by market value has weathered a period of weakness.

“If you borrow billions of dollars at 1% interest and invest it in the next Big Tech digital network that you thought was going to be the dominant Amazon or [Alphabet‘s]gugg Google or Facebook of money, why wouldn’t you?” Saylor said. “I mean, if I could borrow $1 billion and buy Facebook a decade ago for 1% interest, I think I would’ve done quite well.”

Facebook went public in 2012, about eight years after its founding. It’s public debut had a rocky start but has since grown a company worth more than $1 trillion in stock market value.

MicroStrategy CEO Michael Saylor speaks at the Bitcoin 2021 Convention, a crypto-currency conference held at the Mana Convention Center in Wynwood on June 04, 2021 in Miami, Florida.
Joe Raedle | Getty Images

Shares of MicroStrategy are up about 400% in the past 12 months, although the stock has been more than cut in half since hitting $1,315 on Feb. 9.

The company’s first bitcoin purchase was announced last year on Aug. 11, buying 21,454 bitcoins with an overall price tag of $250 million including fees and expenses. In August of last year, bitcoin was trading in the low $11,000 range.

As of June 30, when the company’s second quarter ended, MicroStrategy held a total 105,085 bitcoins at an aggregate cost of $2.7 billion. That bitcoin trove was valued around $4 billion, based on Friday’s trading price around $39,000, according to Coin Metrics.

Bitcoin hit an all-time high of nearly $65,000 per token in mid-April, coinciding with the excitement surrounding crypto exchange Coinbase‘s blockbuster direct listing, which fizzled after an initial pop. Bitcoin has also struggled since, twice breaking below $30,000.

“Everybody is looking for this open way to store value and move value at the speed of light using a computer chip and a mobile phone,” Saylor said. “You had Google. They created digital books. You had Facebook; they created digital communications. Apple gave us digital music, and Amazon gave us digital retail. Bitcoin is digital property on a big tech, open monetary network.”

“Our view is it’s only a matter of time before billions and billions of people have mobile phones pugged into bitcoin, and we just want to be there first,” Saylor added.

In further defending the company’s bitcoin play, Saylor said it has helped MicroStrategy’s core business intelligence software operations. In the second quarter, total revenues rose 13% year over year to $125.4 million. That’s up 6% compared with the second quarter of 2019, when the coronavirus pandemic had yet to disrupt the global economy.

“It’s a door-opener,” Saylor said of the company’s bitcoin association. “It’s very important that people know who you are. That starts the conversation. It’s been great for our enterprise software business and it’s been great for employee moral, as well.”

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