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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
The bloom has come off Michael Saylor’s rose.
On the earth of bitcoin, no firm has captured the general public creativeness fairly like Technique (née MicroStrategy). Beneath its government chair, this erstwhile enterprise software program vendor has reinvented itself as a bitcoin funding automobile. Its pivot in August 2020 from software program to “stacking sats” has delivered a 23-fold achieve for stockholders, and pioneered the concept of bitcoin treasury firms, inspiring more than 170 imitators. With over 640,000 bitcoin — about 3 per cent of the complete provide — Technique is a real whale within the crypto ocean.
But because the unveiling of its so-called 21/21 capital strategy in late October — a plan to boost an eye-watering $42bn to purchase extra bitcoin — the corporate’s shares have lagged the very asset they’re meant to outperform. To this point in 2025, bitcoin has risen 22 per cent in comparison with only a 9 per cent achieve in Technique, an awfully giant “monitoring error” by any measure. The inventory nonetheless trades at a premium of roughly 1.4 occasions the corporate’s internet asset worth, however that premium has shrunk from over thrice in November, suggesting mounting market unease.
The stress could sharpen with its most recent SEC filing. On Monday, Technique disclosed an additional $22.1mn buy of bitcoin at a median worth of $113,048.
Typical Saylor, on the face of it —“At all times Be Stacking,” he tweeted yesterday, echoing Alec Baldwin’s legendary tirade within the 1992 movie Glengarry Glen Ross — even when the acquisition measurement is a lot smaller than regular.
However the identical 8-Okay submitting additionally revealed the corporate had raised $128.1mn (largely from promoting frequent inventory), leaving a niche of about $106mn.
That $106mn didn’t go into bitcoin. As an alternative, it’ll at this time be channelled into dividend funds owed on 4 courses of perpetual most well-liked inventory.
The yawning hole between cash raised and bitcoin bought exposes the circularity of Saylor’s enterprise mannequin. Aside from the legacy software program arm — which generates little, if any, money — the corporate sells no services or products. Its fundamental output is its personal securities, mainly frequent inventory. In impact, the corporate has transitioned from SaaS (software-as-a-service) to DaaS (dilution-as-a-strategy).
With no operational free money circulation to cowl most well-liked dividends, Technique should maintain issuing new frequent shares to boost funds. It’s the company equal of diluting common Peter to pay preferred Paul. The result’s a system that subordinates unusual shareholders twice over. They not solely rank behind $8.2bn of convertible bondholders and $6.6bn of most well-liked stockholders within the occasion of any liquidation, but additionally shoulder the burden of financing the dividends that prop up these most well-liked devices.
Saylor and his supporters discuss of a monetary “flywheel” and the “torque” generated by this construction, designed to enlarge good points for frequent holders if bitcoin appreciates. However what we truly see is dilution and subordination, worth structurally redirected from one stakeholder group to a different.
Briefly, an funding in Technique displays a multi-layered bet: on bitcoin itself, on the enduring premium to internet asset worth of its inventory, and on the survival of a mannequin that depends upon fixed newcomers to service Technique’s personal obligations. Above all, it’s a guess on Michael Saylor’s skill to untether the frequent inventory from the relentless drag of its personal dilution.
