MicroStrategy Increases Bitcoin (BTC) Purchases; Famous Company's Target…

The American company MicroStrategy frequently records purchases of the cryptocurrency leader Bitcoin (BTC). What advantages do Bitcoin purchases bring to companies? Why does MicroStrategy hold $4.7 billion worth of BTC? Here are the details...

MicroStrategy CEO Michael Saylor made important statements. Saylor likened his company's performance to a boat rowing against a very strong wind. Earlier in the week, Technology company MicroStrategy announced that they purchased $25 million worth of Bitcoin (BTC) in the first month of the year. Successful businessman Michael Saylor joined a PodCast to share the details behind his company's move to accumulate 125,051 Bitcoins in 2020 and 2021. Founded in the late 80s, MicroStrategy (MSTR) is a publicly traded business intelligence and software provider, but it is better known for the $4.7 billion in Bitcoin it holds on its balance sheet. Before acquiring all that Bitcoin, MicroStrategy, one of the largest independent, publicly traded companies in its industry, generated $480 million in revenue in 2020 and recorded an enviable 8.29% EBITDA (earnings before interest, taxes, depreciation and amortization) margin in the 12 months prior to the initial BTC purchase. CEO Michael Saylor, while recording remarks during the "UpOnly" podcast, stated that they will continue to buy Bitcoin (BTC). He later added that while the company is profitable, it is not appropriate to reinvest profits into crazy hiring or increasing marketing spending. Rising stock prices as the equity market hit new highs have made it easier for big companies to make bigger acquisitions and boost valuations to expand their operations with historically cheap capital. One of the stocks that didn't rally was MicroStrategy. In fact, it was several years behind even before the pandemic hit. From early 2017 to early March 2020, the S&P 500 was up about 31% while MicroStrategy shares were down 31%. The steps taken by the Federal Reserve for the pandemic didn't change anything for MicroStrategy. While the S&P 500 and many growth stocks are nearing highs again just three months after the crash in March 2020, MicroStrategy stock has continued to decline. In one of his many sailing analogies, CEO Michael Saylor compared his company's performance to rowing against a wind blowing harder than a boat can row. Worse, inflation started to rise and the purchasing power of cash was falling sharply against the stock market and any asset they could buy. Therefore, buying Bitcoin felt like turning the boat around and sailing with the wind. On August 11, 2020, MicroStrategy announced the purchase of 21,454 Bitcoins for $250 million. Between August 10, 2020 and the first week of 2021, as Saylor considered the defense of the purchase, the price of MSTR stock rose 263%, from $146.63 to $531.64. Since its first Bitcoin purchase, MicroStrategy has not slowed down. The company has now purchased 0.66% of the entire bitcoin supply at an average price of $30,000. Saylor acknowledged that MicroStrategy has developed a reputation for buying in the local hills. If the company's Bitcoin thesis is correct, it is likely to be part of a strategy that could be very profitable in the long run, even if the company takes a short-term hit in earnings. Under generally accepted accounting principles, a company is required to take an impairment charge on a digital asset if the market price of the asset falls below the company's purchase price, but no gain is recognized until the asset is sold. While the numbers are deceiving, MicroStrategy took an impairment charge of $147 million in the fourth quarter of last year. Besides, if all its hopes are realized, MicroStrategy could maintain its purchasing power, hedge against inflation and potentially outperform other stocks on the stock market.