Topic: MicroStrategy Buys $250M in Bitcoin, Calling the Crypto ‘Superior to Cash’ - page 37. (Read 17191 times)

This is really interesting.
I will try to implement a sort of GAAP reporting computation in the spreadsheet.
As I was able to match the non-GAAP accounting, I expect the same for the GAAP one!

The loss is because GAAP accounting rules require companies to report unrealized gains and losses on a quarterly basis, so companies will often report a this "phantom" income or loss even though it doesn't affect the actual cash flows of the company.  That's what happened here, as MSTR was forced to report a loss on the bitcoins they bought for over $50K each when they dropped to the low 30s.  It doesn't actually affect the cashflows of the company, and if the price goes back up, they'll report a "phantom" gain for the same reason.

Earning Call Time for Microstategy:
MicroStrategy Announces Second Quarter 2021 Financial Results


https://twitter.com/michael_saylor/status/1420839377274560519?s=20

Link to the web version.
Link to the Pdf version.


Regarding the digital asset purchases we record the followiong statements:

• Cash and Cash Equivalents: As of June 30, 2021, MicroStrategy had cash and cash equivalents of $56.4
  million, as compared to $59.7 million as of December 31, 2020, a decrease of $3.3 million.
• Digital Assets: As of June 30, 2021, the carrying value of MicroStrategy’s digital assets (comprised of
  approximately 105,085 bitcoins) was $2.051 billion, which reflects cumulative impairment losses of $689.6
  million since acquisition and an average carrying amount per bitcoin of approximately $19,518. As of
  June 30, 2021, the non-GAAP digital asset cost basis and non-GAAP calculation of the market value of
  MicroStrategy’s bitcoin were $2.741 billion and $3.653 billion, respectively, which reflects an average cost
  per bitcoin of approximately $26,080 and a market price per bitcoin of $34,763.47. MacroStrategy LLC, a
  subsidiary of MicroStrategy, holds approximately 92,079 of the bitcoins.

Everything is in this table.


Luckily, my spreadsheet bear similar results:



Apparently, they are happy with this strategy and willing to go on further:

I think the only way it's possible is if the board convened an emergency meeting for the purpose of removing him, but as Chairman, they couldn't do this without his knowledge.  Logistically I don't know how the order of events would come out first.  Could the board officially fire him before he officially removes board members?  I don't know which events could technically happen first, but I think it's extremely unlikely he would be removed in any event.  After all, he wasn't removed as CEO after fraudulently cooking the books, so I don't know how you could survive outright fraud but not being wrong about an investment where there was no ill intention.

great, I just saw your article and immediately saw it, I really appreciate it, because it is very good news for the future of BTC. I'm glad more people have started accepting BTC and BTC is getting more and more popular.

As you outlined jaysabi, about a snowball's chance in hell of removing him, absent some major-ass screw up and getting himself and/or company into criminal trouble or something like that - otherwise, if he plays within the parameters of his own discretion which is almost complete in the sense of: "if you don't like what I do, get the fuck out then" kind of power, then he's pretty much untouchable.

Don't get me wrong, he seems to be a quite likable guy and seems to be a guy who is interested in seeking better and creative ways of doing things.  So, it would hardly be torture to be working with him (or under him, if that might well be a better description?).  

I personally was annoyed by his seemingly bullying approach in an ESG like podcast/zoomcall/whatever conference (on July 14), and even though Saylor seems to be way smarter than Marty Bent, he did come off as patronizing and even using of unfair kinds of personalizing arguing tactics (bordering on bullying /hoarding the topic) when disagreeing with Marty on some of the disadvantages of the work or intended work of the ESG bitcoin council or whatever they are calling it these days.  You can see that nearly 2 hour discussion, here.

Edit:  Fixed quotes in my first paragraph.. whoops

You can be out for blood all you want, but that doesn't mean you can do anything about it, and in this case shareholders literally can't do anything about it.  Shareholders don't have enough voting power to elect anyone to the board of directors without Saylor's say, so there is literally no way for shareholders to check Saylor's power.  He simply controls too much voting power to ever not get who he wants on the board elected.  And as long as he's making the appropriate risk disclosures, shareholders will likely never win a lawsuit either so there's no way to check him from outside the company either.  MSTR is Saylor's show and investors are only along for the ride.  The best they can hope to do is pressure him to do something, but he'll never be under an obligation to follow it.


Yes, this is technically true. The CEO reports to the board of directors, who have the power to fire the CEO.  However, as a super majority shareholder, nobody can get elected to the board without Saylor's say. Is it possible that if bitcoin falls below $10k, board members will go rogue and seek to fire Saylor? That's possible, however as Chairman of the Board, Saylor has the power to remove board members so he'd likely be able to ward off an attack from the board preemptively. Technically, I suppose I would classify Saylor's involuntary removal as CEO as possible but extremely unlikely. It sure would be interesting to watch a fight like that play out to see if the hypothetical possibility could actually play out in reality.

Maybe you are right.
They are in for a quick profit.
Well, there are many other ways to make a very nice profit, with far less interest to gather around your firm, or potential interest from regulators, the general public etc.
So, we would like to stick to the base scenario: they are here to make a profit, using bitcoins, in the long run.  

Maybe you better stop laughing and read a wee bit more of the thread?

The actions and involvement of Microstrategy in BTC is way more beyond an assessment of what the topic heading says.



Maybe you wished to simplify matters like that?  Remember this thread is a year old, so the initial announcement of how MSTR got started into bitcoin is ONLY part of the story.. but it remains the beginning of the story and the beginning of their CEO taking a pretty damned public stance and getting involved in several areas - not limited to some of his free seminars in early 2021 to help to provide free models for companies to get involved in bitcoin..


You are talking about MSTR? or companies similarly situated?  How high are the odds that BTC will go below $10k?  Are you considering that your generalization is regarding companies getting in after September 2020, and therefore presumably their average cost per BTC would likely be higher than $10k and there are even some with average prices above $50k.. so yeah, some will panic, some will HODL and some will buy more.  Some will tell what they did and some will not. 

Actually, there are a variety of scenarios including that the bottom of $28,600 might already be in or there might be a spike that goes below $28,600 or there might be some sustainable correction below $28,600.  It is surely not obvious that we are currently in a bear market.. and probably the odds are against it, even if there are quite a few folks considering that BTC is in a bear market or might be in a bear market.  We are going to see, aren't we?  Another question is whether the top of $64,895 is "in" for this particular cycle... so sure $64,895 might well be broken in this calendar year or maybe even in the next calendar year (referring to 2022).. what is more likely? 

Sub $16k or supra $65k?  Of course, the BTC price could go either way, but seems to me that peeps who are ONLY betting on down or even placing a very high probability to those various down scenarios are likely to get into considerable trouble. Of course, if you have extreme bets on the down scenarios and you are still hedged for UP that is NOT as bad as NOT having much if any preparation for UP.  Historically, in bitcoinlandia we have witnessed a whole hell of a lot of peeps who had been talking a BIG down game, but not adequately prepared for UP... so lots of folks missed great opportunities to make a lot of money by inadequately preparing for UP (which might not have even had been a very big bet in order to profit stupendously). Is this time different?  I have my doubts, but sure there are likely a considerable number of people who are still not adequately prepared for UP.

Saylor/MSTR and some like minded companies and individuals are not failing/refusing to prepare for UP... so either this calendar year or the coming calendar year, we will see how they fare, won't we?


I doubt that "we all" have the same memory in terms of how you described the situation.  I imagine that you are referring to the March 2020 liquidity event?  Surely there were some extremes with a lot of markets, and there are a variety of reasons for markets reversing and who acted first to buy back.  Some folks sold and some did not... some bought during that liquidity event, so it seems a bit problematic for you to be suggesting that there was any kind of exact ordering of events that might not have caused some individuals (including bitcoiners) to react differently and even to learn from that situation differently from the lesson that you are seeming to want to proclaim..

For sure, many bitcoiners are not going to take your description of the situation or the lessons to be learned as the same as you would like to describe, and sure lessons can be learned from those kinds of events, and if we bring this whole matter back to Michael Saylor and MSTR, Saylor is proclaiming that he did not really have his eyes on bitcoin during the March 2020 liquidity event, but circumstances surrounding that event inspired him to look more into bitcoin.. so sure, we could get another one of those kinds of liquidity events, but the circumstances are a bit different at this particular time, so even if we were to get some kind of similar situation, the passage of events and even the passage of nearly 1.5 years is going to cause the markets to react in different ways than they did in March 2020, and sure, maybe the picture that you are wanting to paint, currently, Princejebs is to suggest that selling some BTC now is a good move in order to prepare - and I doubt that very many peeps would agree with that kind of implication, especially since we already had a 56% correction..and about 2 months in our current 40% to 50% correction range... so selling seems nearly the opposite of what might be prudent at this point... We will see?  We will see.

I can't stop laughing to the heading of this topic. So, they wait and study bitcoin and they concluded that it's best buy, in my opinion, they simply see bitcoin as more way of making profit.
How many of them do you think will hold the moment prove dump below $10k. We all remember during covid-19 when institutions were all afraid and crashed the market until smart money began to buy back and revived back the market.

We have to keep in mind that all companies are not equal in the sense that they can create voting rights in accordance with ownership or whatever other criteria that they deem appropriate, so sure, they could structure an arrangement that a 6 member board has equal voting rights, but I doubt that is how MSTR is structured, and I would wager that Saylor has something close to 70% voting power, and of course, there could be scenarios in which Saylor is abusive of his voting power, and minority shareholders are not devoid of rights either including the right to receive certain kinds of information that is material to their decision-making - and they also have the right to NOT be taken advantage of - for example if they were being defrauded in some kind of way.  I doubt that Saylor is sloppy in either the way that the company's voting is set up and his following of the various rules that pertain to the way that he set it up and any other regulatory requirements that might apply above and beyond, including his various fiduciary duties as a majority shareholder.

Even though I have not studied Apple company history, I doubt that Jobs had anything near to as much power in terms of the actual company structure, but it is possible that when he came back, he could have fixed some of the company structure matters in a way to at least attempt to minimize or lessen the likelihood that he would again be ousted.. I doubt that any major owner feels good about being ousted, but likely they had given up some voting power along the way and took for granted that they would not be ousted (a kind of poor planning in that regard).

I am not a lawyer, and the few notions of rights I have certainly are not applicable to US firms.
I guess what you claim is not feasible, as the board of directors could remove the CEO, but they should be held accountable for this choice to the shareholders, who are ultimately the owners of the firms.
So, maybe the board could oust the president of the board and the CEO, but they would later have to justify this decision to the shareholders, who are the ex-CEO and the ex-president of the board.
Very unlikely.

The only case that came to my mind is when Steve Jobs had to leave Apple. What was his shareholding when this happened?

That's interesting.  I can't stand Facebook and haven't followed their stock and certainly wasn't aware of how it was structured, so thank you for that info. 

My remaining question is: Doesn't the board of directors still have the authority to oust him as CEO if, for whatever reason, it came to that?  Boards of directors are supposed to have a responsibility to the companies on which boards they sit, and it's supposed to transcend things like majority shareholders, personal allegiances, etc. (though I realize that in practice it doesn't work that way).  I didn't think a board of directors needed shareholder approval to fire a CEO--and yes, I realize that Michael Saylor is chairman of the board, but he's not the whole board.

I'm probably sounding argumentative, but I'm really just trying to understand how that kind of arrangement works--or how it could work in a worst-case scenario.  I'm genuinely interested in corporate finance and don't fully understand the relationship between voting rights, being a major shareholder, and the security of the CEO position in this particular company.

I strongly doubt that. This double share trick is also very common amongst Tech Companies. (also Facebook's Zuckerberg has a very similar arrangement):

https://www.businessinsider.com/man-in-charge-of-the-internet-who-can-never-be-fired-is-learning-from-his-mistakes-2018-4?r=US&IR=T

I am going to update the count of shares in this spreadsheet as soon as I will return to my fully enabled workstation in a few weeks.

If I'm not mistaken (and I certainly could be), even a CEO with 70% voting power can be ousted from their position if the board of directors chooses to replace them.

But assuming that I am wrong, then my concerns about a shareholder revolt are unfounded, but that doesn't mean that if MSTR continues to be more intertwined with bitcoin and if bitcoin were to suffer a serious crash, the company's stock wouldn't be in jeopardy.  It could very well be--but it also sounds like Michael Saylor probably wouldn't care much about that.  He probably cares more about the price of bitcoin than he does about the price of MSTR's stock (though I have no idea if that's really true).

In any case, thanks for clarifying that he's got that much voting power, because I didn't know that and it clears up a lot of things in my mind--especially why he felt as free as he did in buying up so much bitcoin, something that a typical CEO would likely not feel free to do with their company's money.

I agree that it is a dangerous strategy to borrow for investments if you do not have sufficient cashflow to service the debt and also other quasi-liquid assets or resources that you could use if the loans come due and the invested asset is not performing sufficiently to service the debt (that is in 4-7 years for the Microstrategy serviced debt).

People do need to know how to manage their debt if they are going to use debt in that way, including understanding aspects of their cashflow.. including accounting for possible negative scenarios, too.


Of course, also being smart in one way does not automatically translate to being smart in another way, but I still think that he has actually demonstrated a variety of ways in which he is pretty smart, but even smart as fuck folks do not necessarily know the future.. but they (including Saylor) seems to understand a variety of ways of assessing both risk and also assessing probabilities of a variety of futures


Another aspect is that Saylor does not need to be correct about a lot of the details of his picture of the future world in order to still be sufficiently and adequately correct about the general direction of bitcoin.. and even if he gets some of the degree wrong, if he just gets part of the direction correct, then it would likely be sufficient to cover his bets.

Time will tell whether he is a genius or a madman, and, as far as we are concerned, I hope he is a genius.


What I don't like and what many people on the forum don't like is this insistence on borrowing to buy Bitcoin, even from your home. I don't know if you would be thinking about that. Borrowing in a smart way with a good debt to equity ratio is what a lot of billionaires do, but it strikes me as dangerous advice for the masses. It's one thing Giustra threw in his face in the Bitcoin vs Gold debate and I think he was right.


Yes, and what's more, not just any schmuck graduates from MIT:

"He graduated from MIT in 1987, with a double major in aeronautics and astronautics; and science, technology, and society."

As you were saying, of course, just because he's very smart doesn't mean he can't make mistakes.


He considers Bitcoin the best financial asset in the world. It makes no sense to sell it no matter how big the short-term volatility may be. This is what the Rockefellers and the Rothschilds do.

I have watched many of his videos, and what he says now about Bitcoin he was saying about Google, Facebook and Apple ten years ago. Again, he could have been right on this and wrong now, but I think the evidence gives more credibility to what he says.

His thinking back then is summarized in his book The Mobile Wave, where he was able to make an accurate diagnosis of what was to come.  

Nowadays he says:

A little bit of catch up on this thread.
Sorry for poor formatting and typos, I am under an umbrella on a secret beach.


Micheal Saylor is immortal for what is worth.
He steady survived a 5 USD Microstrategy share price (coming from 3,000).
This is not magic, this is him holding the 70% of voting power.


This is also my guess. And this is the very meaning of treasury asset. But also I guess the tend to make everyone well aware of the fact they just bought. Because, you know, it is better for them.


There is a very precise reading for that.
MSTR has become common people Bitcoin ETF. But not only common people. There is a whole class of investors who are not allowed to buy real Bitcoin, bot a variety of reasons. So they have to divert their investment toward inferior choices, MSTR share included.
Those kind of investors are going to dump the share at the first sign of doubt by Saylor, as they are long MSTR only because of their BTC holding, rather than their core business (they are a software company after all, can you believe that?).
Micheal Saylor then has a precise incentive not pissing them off.


This is exactly the case.
In the spreadsheet linked in OP there is a detailed. Imputation of Micheal Saylor’s voting rights.

I'll go with what Saylor himself already said. He said only in 2020. The thousand hours may be hyperbole, but that does not matter if one spends days and weeks, maybe even months reading everything one can about bitcoin.

I had not known about the claim of having had spent more than a thousand hours studying bitcoin, so sure it takes time to reach 1,000 or even thousands of hours.  Perhaps around 62.5 days bare minimum to reach 1,000... which would be 16 hours per day, and that would get the number of hours to 1,000  (1,000 / 16 = 62.5).  By the way, when you own a pretty decently sized business and you employ the services of attorneys and accountants, you likely can get some magnitude manpower hours - and gained knowledge from the employment of those kinds of professional people and having them focus efforts upon bitcoin.  I am not saying that you would still not have to have personal hours in order to claim that you have spent more than a thousand hours studying bitcoin, even if you might have some abilities to get access to better information and even the fact that you have studied some similar (and even difficult) topics in the past might allow you to understand deeper concepts more quickly and require fewer hours of study in order to get to the level of understanding of someone without that kind of educational/experiential background.

In any event, so far there is nothing really contradicting the claim that Saylor first got started in bitcoin in 2020, and he has proclaimed on a few occasions that the March 2020 liquidity event caused him inspiration to really start looking  into the matter...  

Look at the beginning of this thread.  Saylor became a public figure in bitcoin in about August 2020 through some of those first Company purchases of bitcoin that he had made, and I believe that later Saylor disclosed that he had personally purchased around 17k bitcoin before his company bought... so maybe a month or so earlier.. but he had already been studying bitcoin for a few months by the time August came and he became a public figure.  So, if he had not quite yet achieved 1,000 hours by the time that he got into bitcoin, he did quite a few things since August 2020 that may well have taken him above a thousand hours of bitcoin study, so having had studied bitcoin for more than a thousand hours should not be inaccurate - even with his seemingly somewhat short involvement in bitcoin, relatively speaking.

Am I missing your point, Daltonik?