Companies that learned from MicroStrategy and bought Bitcoin aggressively

Rachel , Golden Finance

In this bull market, MicroStrategy has undoubtedly become a star company because of its crazy purchase of Bitcoin.

The current behavior of MicroStrategy in buying Bitcoin can be simply summarized as: issuing convertible corporate bonds to raise funds from the public, and then using the raised funds to buy Bitcoin as company reserves. Because Bitcoin continues to rise, MicroStrategy's valuation has risen and its stock price has risen.

This strategy is a win-win for both the company and the creditors who buy convertible bonds. The company's valuation has achieved a spiral rise, and the creditors can either protect their principal and receive interest, or enjoy the rise in stock prices after the bonds are converted into MicroStrategy's stocks.

The risk is transferred to those shareholders who later buy MicroStrategy stocks. As long as Bitcoin can continue to rise, this strategy of issuing bonds to buy coins can always be implemented. MicroStrategy, which has been buying Bitcoin since 2020, has also seen its stock price increase more than twenty times.

It is precisely because of the huge profits behind MicroStrategy's bond issuance and currency purchase that some companies have followed suit. Most of these companies' main businesses are not on the blockchain. Thanks to the act of buying Bitcoin, their stock prices have also risen with the rise in Bitcoin prices.

MicroStrategy's stock price - an amplifier of Bitcoin prices

In 2020, MicroStrategy began to purchase Bitcoin, and it was also the first US listed company to integrate Bitcoin as a reserve asset.

The first acquisition announced by MicroStrategy included approximately 21,000 BTC, worth more than $250 million, when the price of Bitcoin was less than $10,000.

Initially, it used cash purchases, and then turned to the use of issuing and selling stocks and convertible bonds to raise funds

MicroStrategy currently holds more than 380,000 Bitcoins. The most recent one was to buy Bitcoins worth a total of approximately $5.4 billion at an average price of $97,862 per coin.

MicroStrategy was originally an intelligent software company. After buying Bitcoin, its image in the outside world has become a "shadow company" of Bitcoin. From October 2000 to September 2020, MicroStrategy's stock price remained below $20 per share. As it continued to purchase Bitcoin, the rise and fall of its stock price began to deviate from its own business, and instead became a Bitcoin concept stock.

Thanks to the strategy of actively buying Bitcoin in recent years, MicroStrategy's stock price has soared more than 20 times from $20 in 2020. MicroStrategy's stock price has become an amplifier of Bitcoin's price, and its increase in recent years has far exceeded Bitcoin.

MicroStrategy Model Disassembly

In the early years, MicroStrategy used cash to buy Bitcoin directly, but now, it is issuing convertible bonds to buy Bitcoin. The process and principle of MicroStrategy issuing bonds to buy Bitcoin and then selling stocks are as follows:

1. Issuing convertible bonds: MicroStrategy chooses to raise funds by issuing convertible senior notes to qualified institutional buyers.

2. Attracting investors to buy convertible bonds: Although MicroStrategy's convertible bonds have low coupon rates and high conversion prices, they are still attractive to some investors for the following reasons:

a. Low risk: Even if they are not converted at maturity, investors can get back their principal unless MicroStrategy goes bankrupt.

b. Option value: Investors have a six-year option. Once the MicroStrategy stock price rises above the agreed price, they can execute the stock exchange. From the perspective of the option market, the cost is relatively low.

3. Use funds to buy Bitcoin: MicroStrategy will use the funds raised by issuing convertible bonds to buy Bitcoin and continue to increase its Bitcoin holdings.

4. Selling stocks: When the price of Bitcoin falls, MicroStrategy may respond by selling stocks. On the one hand, the sale of stocks can provide the company with additional funds to meet debt repayment or other funding needs to maintain the company's financial stability; on the other hand, by adjusting the proportion of stocks and Bitcoin held, balancing asset allocation, and reducing the risks caused by Bitcoin price fluctuations.

5. The synergy and impact of the overall strategy:

a. Stock-coin relationship: The issuance of stocks at a premium to buy Bitcoin will drive Bitcoin up, thereby increasing the company's net assets per share and earnings, forming a positive cycle. In addition, financing to buy coins has accelerated the growth rate of profits and expanded the valuation multiples, prompting the stock price to jump from linear growth to exponential growth, and the market value and stock price have risen more than the price of Bitcoin itself.

b. Stock-debt relationship: MicroStrategy's market value has risen, pushing it into more indexes, increasing the number of trading derivatives, and increasing trading volume, reducing the cost of stock and debt financing. Its convertible bonds are uniquely designed, and the options of conversion and cash repayment are in the hands of MicroStrategy, which avoids the default problem caused by the inability to repay the convertible bonds at maturity, and essentially becomes a "bond-equity" tool that is friendly to stock prices and shareholders.

c. Currency-debt relationship: The bonds are denominated in US dollars, and the purchasing power tends to zero in the currency standard position, while the initiative of the convertible conditions is in MicroStrategy. By using this special "debt" to buy Bitcoin, in the long run, as long as the price of Bitcoin rises, the company has the opportunity to obtain rich returns, and the risks are controllable.

Companies learning from MicroStrategy

Just buying Bitcoin can increase the stock price by 20 times, and countless companies are jealous and have also learned from MicroStrategy.

For these companies, the most direct impact in the short term is that although the company's debt has increased, it has also received a cash inflow, which helps to ease the company's financial pressure. As Bitcoin rises, the value of the Bitcoin assets held by the company rises, and for listed companies, their stocks will also become crypto concept stocks, climbing with the rise of the crypto market.

Especially in the second half of this year, listed companies have started a big sweep of Bitcoin. The following are some companies that use Bitcoin as an asset reserve:

Marathon Digital:

Like MicroStrategy, this company, which is regarded as the world's largest Bitcoin mining company, has also issued convertible bonds to purchase Bitcoin.

According to HODL15Capital statistics, as of November 15, 2024, Marathon Digital ranked first in the ranking of publicly listed Bitcoin mining companies with 27,562 Bitcoins.

In November 2024, it issued 1 billion convertible bonds, and the company plans to use approximately $199 million of these proceeds to repurchase $212 million of 2026 convertible bonds. The remaining funds will be used for Bitcoin acquisitions and general corporate purposes, including potential strategic acquisitions, asset expansion and debt repayment.

Its earliest purchase was in July 2024, when the company bought 2,282 bitcoins for $120 million, and then began selling $250 million in private bonds to buy bitcoin again.

Nilam Resources:

On March 25, 2024, Nilam Resources, a gold mining company based in South America, announced plans to acquire 24,800 bitcoins worth approximately $1.7 billion by issuing priority Series C shares. The main purpose of the transaction is to acquire MindWave, a special purpose entity based in Mauritius, which holds a large number of digital assets, including Bitcoin. These assets will be used as collateral for the company's further investment in high-yield projects. The acquisition was reached by Nilam and Xyberdata Ltd. through a letter of intent (LOI) and is planned to be completed through equity swaps. Nilam believes that this move will help it explore the digital asset market and expand financing channels.

SOS Ltd.:

This is a Chinese company listed on the New York Stock Exchange with artificial intelligence and blockchain as its core technologies. On November 27, 2024, it announced that its board of directors had approved a plan to invest $50 million to purchase Bitcoin (BTC) in order to strengthen its blockchain industry layout.

Previously, the company has been deploying crypto mining companies for many years. As early as 2020, SOS announced that it would spend about $20 million to purchase 14,238 Bitcoin mining machines and 1,408 Ethereum mining machines; in 2023, SOS announced the launch of more than 5,000 self-owned mining machines in its Texas hosting center, and has signed a hosting agreement with Bitmain for a total of 6,000 hosting mining machines, which will expire on August 20, 2025.

In order to maximize the return on investment and reduce the risk of market volatility, SOS plans to adopt a variety of quantitative trading strategies including investment, trading and arbitrage strategies to help the company achieve stable returns in the current market environment, while further optimizing the portfolio over time.

Metaplanet:

This is an investment company based in Japan, which focuses on investments in high-tech and innovation fields, especially in artificial intelligence, blockchain technology, financial technology, etc., and has been listed. On November 28, 2024, it announced plans to raise up to 9.5 billion yen (about 62 million US dollars) through new share subscription rights to accelerate Bitcoin accumulation.

Earlier this month, it also stated that it would issue ordinary bonds (secured) totaling 1.75 billion yen (about 11.3 million US dollars) with an annual interest rate of 0.36% and a term of one year. The proceeds will be used to purchase Bitcoin.

Since April 2024, it has continued to accumulate Bitcoin as its strategic fiscal reserve asset. Because of this behavior, it is called "MicroStrategy of Asia". As it continues to buy Bitcoin, its stock price, like MicroStrategy, continues to rise with the rise in Bitcoin prices.

Boya Interactive:

The company is a developer and operator in the board game industry. It was founded in 2004 and listed on the Hong Kong Stock Exchange in 2013. It began to purchase cryptocurrencies, including Bitcoin, Ethereum, and USDT in 2023. When the price of Bitcoin exceeded $90,000 on November 12, 2024, Boyaa Interactive voluntarily disclosed its holdings: the company held 2,641 Bitcoins and 15,445 Ethereums, with a total cost of approximately $143 million and $42.5781 million, respectively, and an average cost of approximately $54,000 per coin and $2,756 per coin. The floating profit was nearly $100 million.

Tesla:

Since 2021, Tesla has been continuously buying Bitcoin, and of course it will sell it when the time comes. According to arkham data, Tesla holds 11,509 Bitcoins.

SpaceX:

The company led by Elon Musk also reportedly holds Bitcoin, but the specific amount has not been made public. It is estimated that SpaceX holds several thousand BTC in its company vault.

Block.one:

EOS's parent company, it is reported that it holds up to 140,000 Bitcoins, but the company's actual Bitcoin holdings and related investment details are not fully public and transparent.

Block Inc.:

A U.S. payment company, its co-founder Jack Dorsey announced that starting in April 2024, Block will take out 10% of the gross profit of Bitcoin-related products each month to buy Bitcoin. It first started buying Bitcoin in October 2020. According to data from the buybitcoinworldwide website, as of September 18, 2024, Block, Inc. holds 8,211 Bitcoins.

Nexon Co Ltd:

A South Korean company specializing in video game creation. It started buying Bitcoin in April 2021 and reportedly spent about $100 million to buy 1,717 Bitcoins.

Blueport Interactive:

Hong Kong-listed gaming company Blueport Interactive has purchased cryptocurrencies several times since 2023. It purchased 19.3808 Bitcoins between June 30, 2023 and July 7, 2023, with a total value of approximately $590,000. Previously, between June 6 and June 15, it spent $650,000 to buy 24.8932 bitcoins. On September 13, 2024, in the previous 12 months, the company purchased a total of 93.85 bitcoins, spending $2.7 million. In November 2024, Linekong Interactive announced the launch of BTC NEXT, a $15 million Bitcoin network ecological investment management fund.

Linekong Interactive actively deploys Web3, and has a lot to do with founder Wang Feng.

Yingyuzhou:

This is the parent company of Yingke APP, which has been listed on the Hong Kong stock market. It announced in March 2024 that its board of directors had approved a budget of $100 million for the company to purchase cryptocurrencies on any regulated and licensed trading platform over the next five years.

Of the 100 million US dollars, 60 million US dollars will be used to purchase Bitcoin, about 20 million US dollars will be used to purchase Ethereum, and about 10 million US dollars will be used to purchase USDT and US dollars respectively.

Guofu Innovation:

Guofu Innovation, a financial company listed on the Hong Kong stock market, announced in August 2024 that the company had purchased Bitcoin worth a total of HK$36 million from March to August.