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The article makes a compelling argument that MicroStrategy can afford to service the debt, no matter what happens. Opinions differ over whether the investment

The article makes a compelling argument that MicroStrategy can afford to service the debt, no matter what happens. Opinions differ over whether the investment was good, and I doubt anyone's mind was changed in this discussion. But there is a third element that should be discussed, I think: Does the investment fit with the company's business strategy? I haven't seen the article make an argument that it does. Apple has cash. Tuna fishing is profitable. But does this mean Apple should invest in a tuna fishing fleet?

cyphertruck 6y ago
Bitcoin is a scarce asset with little to no execution risk. A tuna fleet is a business subject to the whims of the market with execution risk. Since equities have been the primary investment medium fir years, people think of Bitcoin like a stock — it even has a ticker. But it is a genuinely new thing. Like gold it is a scarce asset. Unlike gold its scarcity is deterministic, and it can be transacted over the internet.
- zucker42 6y ago
  If a company is investing in non-synergistic assets with excess cash, why not just instead convert that cash to shareholder profits?
  - gxon 6y ago
    Tax advantage? If you pay out a dividend, you force your shareholders to pay income tax rates. But, if you can use company profits in a way that pumps the stock valuation, your shareholders can effectively take the same profits with long term cap gains tax. My understanding is that a stock buyback is basically this strategy, and MicroStrategy's CEO has said that he also considered that. MSTR is up ~100% since they first bought bitcoin. This is at least, my amateur understanding that could be wrong.
- microtherion 6y ago
  > Bitcoin is a scarce asset Bitcoins themselves are available in limited quantity, but new cryptocurrencies are created all the time. > with little to no execution risk. You've got to be kidding me! Cryptocurrencies are notoriously difficult to even store safely.
  - DavidSJ 6y ago
    Bitcoins themselves are available in limited quantity, but new cryptocurrencies are created all the time. Yes, but it's much easier to create a new cryptocurrency than it is to create a social convention that a new cryptocurrency has value.
    - microtherion 6y ago
      The proliferation of successful DeFi exit scams would suggest it's not THAT hard.
  - oillio 6y ago
    Microstrategy is not storing their own bitcoin. There are well respected custody solutions available these days. Execution is outsourced and insured, Microstrategy is bearing very little of that risk.
    - microtherion 6y ago
      Can you define "well respected" in a bit more detail? It seems that by definition, everybody in the cryptocurrency space is still fairly new at this, reputations can be built quickly, and identities are less transparent than elsewhere. There is a lot of shady business going on in traditional banking, but I can be reasonably sure that e.g. Deutsche Bank is not just one guy keeping all assets on his personal laptop who may or may not have died in India last week. As for "outsourced", I thought that was supposed to be BAD? "Not your keys, not your coins", wasn't it? "Insured" by whom?
      - oillio 6y ago
octoberfranklin 6y ago
> Does the investment fit with the company's business strategy? This situation is an obvious and predictable consequence of the SEC's refusal, after seven years, to approve any kind of bitcoin ETF whatsoever. It's not like they haven't had plenty of options to choose from. Stock market investors obviously demand the ability to get bitcoin exposure using stock exchange transactions. It should surprise nobody that companies are interested in meeting that demand.
123six 6y ago
You're right. This 'strategy' question is a mis-understanding people still have with Bitcoin, I probably should have written about it. My TL;DR is: Bitcoin is not a business, it doesn't require a staff to run, yet it is still viewed through the same lens as a business acquisition or strategic pivot. If executed right, a Bitcoin purchase changes absolutely nothing about the underlying business. Bitcoin is nothing more than a tool for MicroStrategy to keep the money they've earned over the last 31 years.
- oillio 6y ago
  I totally agree with you at the surface, and Microstrategy has been officially saying similar. However, the company is starting to look more and more like a Bitcoin ETF. The CEO is out promoting bitcoin much more than his company's services. The stock is trading increasingly in line with the bitcoin price... This may very well be a genius strategic move on their part, but lets call a spade a spade. At this point, in the eyes of investors, the company is increasingly tied to the success or failure of bitcoin.
  - darkcha0s 6y ago
    Dare I call it a publicity stunt for a product which isn't great compared to what its competitors offer? Nevermind that, lets focus on them investing in bitcoin
tradertef 6y ago
>> Apple has cash. Tuna fishing is profitable. But does this mean Apple should invest in a tuna fishing fleet? Yes.

cyphertruck 6y ago

Bitcoin is a scarce asset with little to no execution risk. A tuna fleet is a business subject to the whims of the market with execution risk. Since equities have been the primary investment medium fir years, people think of Bitcoin like a stock — it even has a ticker. But it is a genuinely new thing. Like gold it is a scarce asset. Unlike gold its scarcity is deterministic, and it can be transacted over the internet.

zucker42 6y ago
If a company is investing in non-synergistic assets with excess cash, why not just instead convert that cash to shareholder profits?
- gxon 6y ago
  Tax advantage? If you pay out a dividend, you force your shareholders to pay income tax rates. But, if you can use company profits in a way that pumps the stock valuation, your shareholders can effectively take the same profits with long term cap gains tax. My understanding is that a stock buyback is basically this strategy, and MicroStrategy's CEO has said that he also considered that. MSTR is up ~100% since they first bought bitcoin. This is at least, my amateur understanding that could be wrong.
microtherion 6y ago
> Bitcoin is a scarce asset Bitcoins themselves are available in limited quantity, but new cryptocurrencies are created all the time. > with little to no execution risk. You've got to be kidding me! Cryptocurrencies are notoriously difficult to even store safely.
- DavidSJ 6y ago
  Bitcoins themselves are available in limited quantity, but new cryptocurrencies are created all the time. Yes, but it's much easier to create a new cryptocurrency than it is to create a social convention that a new cryptocurrency has value.
  - microtherion 6y ago
    The proliferation of successful DeFi exit scams would suggest it's not THAT hard.
- oillio 6y ago
  Microstrategy is not storing their own bitcoin. There are well respected custody solutions available these days. Execution is outsourced and insured, Microstrategy is bearing very little of that risk.
  - microtherion 6y ago
    Can you define "well respected" in a bit more detail? It seems that by definition, everybody in the cryptocurrency space is still fairly new at this, reputations can be built quickly, and identities are less transparent than elsewhere. There is a lot of shady business going on in traditional banking, but I can be reasonably sure that e.g. Deutsche Bank is not just one guy keeping all assets on his personal laptop who may or may not have died in India last week. As for "outsourced", I thought that was supposed to be BAD? "Not your keys, not your coins", wasn't it? "Insured" by whom?
    - oillio 6y ago

octoberfranklin 6y ago

> Does the investment fit with the company's business strategy? This situation is an obvious and predictable consequence of the SEC's refusal, after seven years, to approve any kind of bitcoin ETF whatsoever. It's not like they haven't had plenty of options to choose from. Stock market investors obviously demand the ability to get bitcoin exposure using stock exchange transactions. It should surprise nobody that companies are interested in meeting that demand.

123six 6y ago

You're right. This 'strategy' question is a mis-understanding people still have with Bitcoin, I probably should have written about it. My TL;DR is: Bitcoin is not a business, it doesn't require a staff to run, yet it is still viewed through the same lens as a business acquisition or strategic pivot. If executed right, a Bitcoin purchase changes absolutely nothing about the underlying business. Bitcoin is nothing more than a tool for MicroStrategy to keep the money they've earned over the last 31 years.

oillio 6y ago
I totally agree with you at the surface, and Microstrategy has been officially saying similar. However, the company is starting to look more and more like a Bitcoin ETF. The CEO is out promoting bitcoin much more than his company's services. The stock is trading increasingly in line with the bitcoin price... This may very well be a genius strategic move on their part, but lets call a spade a spade. At this point, in the eyes of investors, the company is increasingly tied to the success or failure of bitcoin.
- darkcha0s 6y ago
  Dare I call it a publicity stunt for a product which isn't great compared to what its competitors offer? Nevermind that, lets focus on them investing in bitcoin

tradertef 6y ago

>> Apple has cash. Tuna fishing is profitable. But does this mean Apple should invest in a tuna fishing fleet? Yes.