Microstrategy’s All-or-Nothing Bitcoin Bet

Question: What is today’s best definition of a gambler? Answer: someone who buys shares in Microstrategy. That's the analytics software firm which in the past two years has decided to put almost every cent it can find into bitcoin. As of Feb. 14, its total BTC investment amounted to $3.77 billion, about 20 times the cash Microstrategy’s software business generated over the past three years. It financed the purchases by selling bonds, convertible notes and stock. Now Microstrategy is doubling down: It revealed today it had borrowed $205 million, secured against its bitcoin holdings, to fund even more purchases. 

Call us conservative but that seems a trifle risky. If bitcoin prices soar, sure, this investment could turn into a bonanza. But if bitcoin prices tank, well…you can guess what will happen. Some businesses that deal with Microstrategy have already made up their minds about the risks involved. The company revealed in a recent securities filing that due in part to “the novelty of our bitcoin acquisition strategy, we have been unable to obtain director and officer liability insurance on acceptable terms.” In other words, insurance companies are leery of the risk of a shareholder lawsuit against Microstrategy’s board.