Topic: CEOs will see it ... sooner or later - page 2. (Read 277 times)

I have my own explanation about big corporations doing stock share buybacks.
They are just full with cash reserves(Thanks to the Federal Reserve ) and they don't want to invest in expanding their business,because of the recession,so buying back their stocks seems like the only option.
Maybe they will be convinced to buy Bitcoins some day,but maybe they won't.The Bitcoin price won't be going always up to the moon.The big corporations are searching for stability and predictability,which cannot be provided by a risky volatile asset like Bitcoin.

It will be rational decision. I'm not saying here that institunions will fomo into bitcoin to gain on bitcoin pump. They will FOMO into bitcoin to gain on their shares pump. As I showed on macrostrategy example. You have $4B bitcoin, your company value grow by $6B

Well, that's what Saylor is predicting. It makes sense but I don't think it will inevitably be that way either. It also sounds to me more like a speculative move that turns into a bubble than a rational move backed by the intrinsic value of Bitcoin. Managers of large companies, although they are human beings and have an emotional side, are usually guided more by rationality in decision making than retail investors who are more prone to be dragged into their decisions by FOMO.

We all know what buybacks are. A situation in which company decides not to invest in the development - in better machines, better technology, improve efficiency but to buy their own shares. What for? Mostly to boost price since the decision of buybacks is made by CEOs that own big chunk of shares, they get a part of the payout in shares, they get bonuses in shares, they can buy shares at discount. This situation is very common and is performed on a huge scale:

"Biggest Buyers
CNBC lists the ten companies with the largest share repurchase announcements made in 2018 through February 15. They are listed below along with their: stock performance year-to-date, over the past year through early trading on February 20, and the amount of buybacks announced:

Cisco Systems Inc. (CSCO): $25 billion buyback
Wells Fargo & Co. (WFC): $22.6 billion buyback
PepsiCo Inc. (PEP): $15 billion buyback
Amgen Inc. (AMGN): $10 billion buyback
Alphabet Inc. (GOOGL), the parent of Google: $8.6 billion buyback
Visa Inc. (V):$7.5 billion buyback
eBay Inc. (EBAY): $6 billion buyback
Applied Materials Inc. (AMAT): $6 billion buyback
Mondelez International Inc. (MDLZ): $6 billion buyback
Lowe's Companies Inc. (LOW): $5 billion buyback"
https://www.investopedia.com/news/10-stocks-poised-outperform-record-buybacks/

How this apply to bitcoin?

"The move brought the company's total holdings to roughly $5.26 billion.
MicroStrategy's bitcoin was purchased at an average price of roughly $24,214 per coin."
"The firm's bitcoin holdings were worth roughly $5.26 billion as of March 11's price per coin. Saylor's firm acquired its bitcoin for some $2.211 billion at an average price of around $24,214 per bitcoin."

https://markets.businessinsider.com/currencies/news/michael-saylor-microstrategy-bitcoin-purchase-cryptocurrencies-digital-assets-2021-3-1030179587

So they invested 2 billion $ into bitcoin (they borrowed 1 billion to do so) and and earned 3 billion $ thanks to it.

Microstrategy marketcap pumped from $1Bilion to $7Billion. Earning 3 billion $ on speculations (not from selling services) pushed Microstrategy marketcap by $6Billion ! Having 5 Billion $ in bitcoin (1B is borrowed, so 4B$) push your company stock value by 6B$! CEOs of every single company will sooner or later realize that decision to invest even a fraction of company reserves will push price of their shares better than buybacks. They will not even care about price. The bigger the better since more hype they will have from bigger and bigger bitcoin hype. They won't care because profit for CEOs will go from pump on their stock not from bitcoin price change.