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The FT does this lighthearted thing every year where we have a stock-picking competition. And in my list of shorts, I put MicroStrategy. And I got annihilated. And what I want to do is understand what it is that I’m missing here.

OK. What are people missing about Bitcoin? And what are they missing about Strategy?

This is Michael Saylor.

His company, Strategy, owns more Bitcoin than any other on the planet. Right now, that’s about $50bn worth. And in the crypto world, that makes him kind of a big deal.

Michael Saylor.

Michael Saylor.

Michael Saylor.

Michael Saylor.

Michael Saylor, MicroStrategy.

The man who never sells, Michael Saylor!

Whether you agree or not with his point of view, he’s very articulate and very loud, and has convinced a lot of people.

Then there’s a sheer dazzle of MicroStrategy shares going up so much in price.

The shares are up over 20 times. It’s one of the best-performing stocks in the world.

What he’s been able to do, for better or worse, is insane, is spectacular.

The entire machine is like a quadratically reflexive, engineered instrument. And you could say, well, Michael, you’re a financial engineer. Yes, I am.

I spoke to investors of all stripes, crypto experts, a former regulator, and the man himself to try and get a clear read on this thing.

My dog is not interested in Bitcoin one bit.

And the more I found out, the more it became clear to me that for a lot of people, this is so much more than just an investment.

Bye.

Take care. Thank you, Michael.

I need to just walk around this block and come back. Yeah. That was a lot.

OK, so a couple of things before we get into this one. First of all, the company changed its name about halfway through our reporting. So sorry, sometimes you’ll hear people saying ‘Strategy,’ sometimes ‘MicroStrategy.’ It’s the same thing. Secondly, this company and I have some history.

Well, unfortunately, we’ve been talking for far too long, so we’d better wrap up this little podcast.

No, I don’t think so. I don’t think it’s time to wrap up. I think it’s time to talk about Katie’s stock-picking results.

I was number 1,360 at one point.

I take it back. You’re not a medium-sized idiot. You are a full-sized idiot.

I bombed so badly.

So that was me getting roundly laughed at for coming fifth from bottom out of over a thousand FT staff and readers in last year’s FT stock-picking competition. For the FT’s markets columnist, that’s not great. And it happened because I bet the price of shares in MicroStrategy, once a little-known software company, would fall in 2024.

What actually happened was that MicroStrategy’s share price increased by almost 400 per cent in a single year, massively outperforming NVIDIA, Meta, Tesla, Apple, and many, many more. That’s given it a market capitalization of $100bn, which is much more than oil giant BP. And if you’re wondering how it did this, I have one word for you, Bitcoin.

MicroStrategy is a business software firm that, after 25 years or so of existence, turned into a Bitcoin investment vehicle.

Under founder Michael Saylor, the company has become this huge leveraged bet on Bitcoin, which means that the company is fueling its purchases of Bitcoin with loads and loads of debt.

Since plunging $250mn of Treasury Reserves into Bitcoin in mid-2020, Strategy sold shares to investors who want exposure to Bitcoin but would prefer to trade company stock. At the same time, it sold debt in the form of convertible bonds to boost its Bitcoin-buying power.

Between November 2024 and January 2025 alone, Strategy bought over 200,000 bitcoins for a combined cost of over $20bn. That has given Strategy something of a cult status. In fact, talking to some investors, it feels less like a stock and more like a belief system.

My name is Jeff Walton, also known as @PunterJeff on Twitter, X. I, in the past, was a reinsurance broker. And now I’m a full-time digital capitalist, analyst on MicroStrategy, which is now known as Strategy. During that huge meteoric rise that we saw in the stock in November, Strategy raised $12bn of capital in 50 days.

It’s incredibly hard to raise $100mn of capital. And they just raised $100mn of capital 120 times in 50 days? And they were able to buy Bitcoin with that capital. That’s insane.

They’re using structured finance. And the common equity holder is saying, thank you very much. I believe in Bitcoin. I’m happy to take the downside risk because I think the downside risk is zero.

Bitcoin is not for the faint-hearted. With no obvious use case, it’s an inherently speculative bet. And by using borrowed money to buy it, Strategy has increased both the risks and the rewards. If Bitcoin’s value drops, losses could be deeper. But if it rises, the gains could be even greater. And back in November, the crypto crowd were feeling pretty bullish about the potential for Bitcoin gains.

Hello, bitcoiners. Thank you very much. Hello. It’s good to be with you.

The United States will be the crypto capital of the planet and the Bitcoin superpower of the world. And we’ll get it done.

The change in leadership in the US has dramatically altered the landscape for crypto in a very positive sense.

We’ve got a political administration in the US that’s talking about a Strategic Bitcoin Reserve. We’ve got a president that’s launched a meme coin. We’ve got a new SEC that’s effectively removed all regulation for digital assets.

And Michael Saylor is, obviously, very happy in all of this. He’s been hanging out with Eric Trump and photographed with members of the Trump family, as the crypto and political worlds unite in the US.

Now, there is an expectation that Trump will be very much engaged in trying to increase the use of bitcoin and crypto in general.

The price of Bitcoin soared to over $100,000. And there is an enormous amount of enthusiasm about the future.

As the go-to leverage bet on Bitcoin, Strategy stood to gain from all this enthusiasm. In fact, investors are willing to pay more for Strategy shares than the paper value of its Bitcoin holdings might necessarily dictate, giving the company something us financy types like to call a premium to its net asset value. This premium is one reason why when Bitcoin took off last year, Strategy’s share price absolutely rocketed.

How heavily exposed to MicroStrategy are you now? And in percentage terms or in dollar terms, how much money have you made out of this stock?

Yeah, over the last two years, my portfolio is up about 3,000 per cent. My entire portfolio all across everything. Of my equity exposure, 99 per cent of it is in Strategy. Yeah.

That kind of performance has only helped to reinforce the premium investors are willing to pay for Strategy’s stock. And the premium itself helps to explain some of the weirder things Strategy does as a company, particularly how and when it goes about its Bitcoin purchases.

One of the interesting aspects of MicroStrategy’s approach is that it doesn’t buy on the dip. It buys on the rip.

Michael Saylor buys Bitcoin almost regardless of the price, like at record highs, when it’s dipped a little bit.

When Strategy was busy making some of the biggest Bitcoin purchases in the company’s history last November, Bitcoin was trading at about $90,000 a pop. Then, when Bitcoin broke $100,000 in December, Saylor celebrated the news with a Bitcoin-themed party at his Miami mansion on New Year’s Eve.

Now, this might seem like a strange reaction from a man whose company is out there trying to accumulate this stuff. It’s getting more expensive for him every day. Then there’s his near-constant social media posts, selling everyone on the virtues of Bitcoin.

Normally, when you’re buying an asset, you keep quiet so you can get it at a cheap price.

But that’s absolutely the opposite of what he’s doing right now.

Here, MicroStrategy and Michael Saylor have been hyping Bitcoin even as they are buying more.

To the point where he’s posting these quite weird AI-generated pictures of himself in a rocket suit, him on a football pitch, all wearing like orange, Bitcoin-branded, AI-generated clothes saying, hey, I’m holding Bitcoin, I believe in it and you should, too.

This gets us to a really interesting point. Company execs are not allowed to hype their own stock. But Saylor’s not doing that, he’s hyping Bitcoin big time. Even so, why would he fire up the price of the thing he’s buying? It all comes back to that premium that investors are willing to pay for Strategy’s stock over and above the price of Bitcoin.

It’s a fascinating case study. I know of no other company that is at the core of their business strategy, in effect, to take advantage of the gap between the share price, the trading price, and the net asset value, for instance, of their Bitcoins.

When general enthusiasm for Bitcoin is high, that’s when the premium investors are willing to pay for Strategy’s shares is also at its highest. And when that premium hits two or more times Strategy’s net asset value, the company has the ability to raise $2 for every $1 of Bitcoin it wants to buy.

When MicroStrategy sells shares and then buys Bitcoin, effectively, it’s buying Bitcoin at a 50 per cent discount. That’s why they’re buying more as the Bitcoin price goes up.

If our stock trades at a 200 per cent premium to the underlying asset, we can sell a billion dollars of the stock, buy back the underlying asset, and make $666mn in that arbitrage of sorts, for the common stock shareholders in a week.

Now, this all sounds like a hype cycle. Surely, it’s unsustainable, right? But for Strategy’s many enthusiasts, it’s Bitcoin alchemy, turning company shares into half-price crypto, while adding value for existing shareholders whose holdings are, in effect, getting watered down.

It’s pretty unusual for shareholders to be happy about being diluted, because it means that their holding in the company is worth nominally less than it was before. But they’re like, if this plan means that you’re going to hold more Bitcoin and the value of our shares is going to go even higher, then fine, go ahead.

Another way of saying it is that even as MicroStrategy is increasing its share count, it’s getting more Bitcoin per share. It is accretive, not dilutive.

This is quite a feat of financial engineering. And it’s part of a wider plan that Michael Saylor’s fans have dubbed, the ‘infinite money glitch.’

Selling shares to buy half-price crypto isn’t the only thing Strategy has done with its premium. It’s also been able to draw in billions of dollars from institutional investors, like hedge funds, who’ve been willing to buy company debt in the form of convertible bonds.

Unlike a lot of meme stocks or a lot of companies where there’s a lot of hype around them, where institutional investors tend to stay away, this time around there is a lot of institutional investor demand in Strategy.

But that is not a verdict on MicroStrategy as a stock. They are often arbitrageurs.

What they’re doing and what they’re looking for is just pure volatility. They are looking to arb out the volatility of the stock.

That is playing off of mispricings, basically, between the convertible bond and the shares, short-selling one, buying the other, that sort of thing.

Because sophisticated investors are able to make money from the bonds using these techniques, they’re happy to buy the debt at little or no interest. In effect, giving Strategy interest-free loans.

We borrowed about $10bn in convertible bonds at about 1 per cent. We just borrowed $5bn in the last few months at 0 per cent. So if you can borrow money for five years at 0 per cent and buy your favourite thing, that company would trade at a premium to the underlying property, because what doesn’t trade better if I give you infinite free money to buy the thing?

Now, this is where the infinite money glitch comes in. Because Saylor is able to raise money on such great terms, and because everyone knows he’ll use the money to buy Bitcoin, whenever he raises money it sends the price of Bitcoin up. That boosts Strategy’s share price, which in turn, helps it raise more money again. And the whole process starts over.

It has its own reflexivity kind of embedded in it, in the sense that he buys more Bitcoin, price of Bitcoin goes up. This creates more expectations for purchases, that gives greater premium to MicroStrategy, which enables more purchases.

It’s just this wheel of continuously raising money to buy Bitcoin and making sure everyone’s happy along the way.

So far, Strategy’s shareholders have been more than happy with this approach. But there’s a massive caveat here.

All of this, of course, depends on the price of Bitcoin continuing to go up, and up, and up, because Strategy’s value and the value that all sorts of investors see in it, is tied only and really only to the price of Bitcoin. No one cares about the software part of the business.

The virtuous circle can turn into a vicious cycle. If the Bitcoin price falls and this premium to net asset value of MicroStrategy shares disappears, because then any purchases of Bitcoin will be dilutive to shareholders.

And this infinite money wheel, this magic money machine, is most likely going to come to a grinding slow, if not a grinding halt because investors will be like, well, we gave you all this money to buy Bitcoin and the price of Bitcoin has fallen, so the value of our investment has fallen. Why would we continue to fund this machine?

Bitcoin maxis like Jeff and Michael Saylor believe in the value embedded in Bitcoin because of its scarcity. I still don’t get this. My teeth are pretty scarce and pretty useful, but they’re not worth billions of bucks. Still, for the believers, there’s just no plausible way for Bitcoin to crash.

Are you comfortable with so much of your personal wealth tied up in this one thing?

Yeah. Yeah, absolutely. In order for something to break Strategy, I think something with Bitcoin needs to break. And if something with Bitcoin broke, which it hasn’t in the last 15 years, it’s the largest decentralised computer network on the planet, then there would be bigger issues. There’s likely bigger issues on the planet.

It’s global EMP or stuff that is black swan type event. And if that’s the case, you’re better off having guns and ammunition at your house, and fresh water, and some food. That’s more of a concern to me, this black swan type event is more of a concern to me. I feel a lot more comfortable with my Bitcoin in MicroStrategy than my house.

The risk of Bitcoin is the existential threat, which is, well, if space aliens land and plant a cyber virus and it goes to zero tomorrow irrevocably with global consensus, then our business fails. I get it. But it’s kind of like I built a a hundred-story building on an acre of schist in Manhattan. And it’s like, well, yeah, if the gods open up a sinkhole and I fall to the centre of the Earth, my building is a nonperformer. At some point, you test the land or the foundation and you decide, what is the risk?

So far, we’ve managed to avoid electromagnetic pulses and space aliens. But something did happen earlier this year that altered the risk profile for markets the world over.

Tariff.

Tariffs.

Tariffs.

Tariffs.

Tariffs.

Tariffs.

My fellow Americans, this is ‘Liberation Day’. Waiting for a long time.

When Donald Trump’s 2025 tariff regime raised fears of a global trade war, it sparked a flight to safety from risky assets across the market, including Bitcoin. The crypto fell below the $100,000-a-coin mark in early February, dropping as much as a quarter of its value before scrambling back up again. Now, just to be clear, we’re not talking about an extinction-level event here.

By the end of April, Bitcoin was back trading near record highs. And Saylor and co don’t seem too worried. As far as they’re concerned, they’ve survived much worse.

Crypto exchange platform, FTX, has collapsed.

We have already seen a significant drop in Bitcoin market depth.

A lot of people’s lives have been impacted directly, over a million people and tens of millions as a result of the contagion and the impact it’s had on the overall industry.

When the Bitcoin price crashed in 2022-2023, people were really asking hard questions about Michael Saylor’s Strategy. And there were a lot of negative articles saying that he had gotten it wrong.

There were a lot of concerns about the company’s financial strength and ability to continue to perform into the future. What we saw is they came back even stronger, right? Their debt had long-term horizons.

Our capital structure is constructed that Bitcoin could fall 90 per cent and stay there for four or five years, and we would still be stable. It wouldn’t be a good outcome for the equity holders, right? The people at the top of the capital structure, they would suffer because they’re levered. But everybody else in the capital structure would get paid out.

So Strategy isn’t going to have to pay its creditors back anytime soon. But questions remain about the company’s ability to service its debts. Almost all the money it’s raised over the past five years has gone on Bitcoin, leaving it with comparatively little operating cash. And thanks to Bitcoin’s recent Trump slump, Strategy posted unrealized losses of almost $6bn on its digital assets for the first quarter of 2025. If the company does need to get its hands on cash in order to meet future debt repayments, it’s either going to have to sell some of its Bitcoin or bring in new investment.

The reliance on new recruits and new money raises questions about the sustainability of what they are doing. But so far, it is working. And as long as MicroStrategy can continue to command a premium to its net asset value, then the strategy will continue to reap benefits for shareholders.

Part of Strategy’s success is down to the fact that it’s been able to issue and sometimes create new types of financial products targeted at different parts of the market.

Think of it as the chocolate hall at Harrods department store. You like chocolate? Hey, we have a chocolate perfect for your particular taste.

Earlier this year, Strategy launched its newest product line, perpetual preferred stock, aimed at investors who want fixed income. It’s a bit less volatile than the common stock and a bit less safe than the convertible bonds. And unlike either, it offers to pay out a dividend. As a new revenue stream, it showed some early promise.

If you look at STRK, S-T-R-K, it’s the best-performing preferred stock in the last four years, Katie.

They raised $580mn of preferred stock. And Saylor’s smash-buying Bitcoin on the other side of it. And we’re going to see this continue to evolve, and these new financial products are going to exist across the market.

So I think that the variety really helps the anti-fragile nature of MicroStrategy. And I think it’s one of the reasons why many people think it will last.

But then in March, Strategy followed up with another preferred stock called STRF. Yep, ‘strife.’ Where STRK allowed Strategy to repay investors in cash or stock, STRF is only paying in cash. And that has the potential to put even more pressure on Strategy’s capital reserves.

The reaction from some in the crypto community was not kind. Some questioned the motivation for this latest offering. Others questioned just how the company planned to pay the millions of dollars needed to cover these cash dividends each year.

Strategy still has limited liquidity. And whether it sells shares of the common stock or even some of its Bitcoin to rectify this, neither of these options will be viable long-term if the price of Bitcoin stops going up.

It still feels to me like this is fine as long as the music’s playing. But if there were some sort of catastrophic hit to the price of Bitcoin, then a lot of these strategies, a lot of the thesis here would unravel. So is it, at its core, is this a leap of faith for an investor to make? You have to believe in the Bitcoin? You have to believe in the ascent of the Bitcoin for all of the rest of it to make sense?

Many people that have adopted Bitcoin think that Bitcoin is going up forever. It is a number-go-up technology. It’s the best savings technology that the world has ever seen.

So long story short here, Strategy holds more of the best asset and the most pristine collateral on the entire planet than any other company by multiples. OK? And my thesis is that it’s going to be the number one publicly-traded equity in the entire market, purely because of their future financial strength.

I think that MicroStrategy is in a position where we can grow from a $100bn enterprise to $1tn enterprise, to a $10tn enterprise.

Where does the Bitcoin price end up in that scenario? Ten years from now, where are we?

Well, my forecast for 2045 is 13mn of Bitcoin I would think in the four to eight-year time frame, certainly in 10 years, we should be at a million. So a million in 10 years. 10x that or more in 20 years.

At this point, let’s just skip over those rules that prevent execs hyping their own stock and concentrate, instead, on the part of that last statement that focused solely on Bitcoin. Bitcoin has stabilised since that sell-off in February and March. And who knows, if the US government announces that it’s going to follow Saylor’s proposal and buy up to a quarter of the world’s supply, then maybe it could get to $13mn a coin one day. But that’s a big if.

If anyone’s out there thinking that this is a great bet on free, future money and the number is always going to go up, that is very risky, I think.

To estimate the price of Bitcoin, I think it’s a fool’s errand. Bitcoin is, unquestionably, a speculative asset.

This is either a gold mine or a mine field. That’s the debate right now in the market.

And for any would-be investors out there thinking of taking a leap based purely on faith in Michael Saylor, there’s something you should know.

In 2000, the US Securities and Exchange Commission made him and some other executives pay a big fine and pay up some profits of the company, worth over $8mn.

The SEC had alleged that there was accounting fraud. And that’s a very serious charge to make. Those charges were settled without any admission of wrongdoing. But it cost them a lot of money. The share price crashed, eventually bottoming out at around $0.42 or $0.43 per share.

Now, I’m not going to sit here and tell you how Strategy or Bitcoin are going to perform in the future. My track record here sucks and I genuinely have no idea. But I would argue that no one else really, truly has any idea either, which is why I get nervous for retail investors, like Jeff, who’ve put all their eggs in Strategy’s basket. Even with a more crypto-friendly administration in the White House, if things go south on this trade, there won’t be any cavalry coming to the rescue.

As long as you, the company, a publicly-held company, make full and fair disclosure, it’s up to the investor to make decisions as to whether or not certain shares are a good deal or not. SEC Commissioner Hester Peirce, she has said, hey, don’t come running to big mama if you lose money.

This is the concern I’ve had about Strategy all along. It’s part of the reason I shorted the company in last year’s FT stock-picking competition. There’s still a lot about this company, and stock, and Bitcoin that I still don’t get. But hey, I’ve been wrong before, I can be wrong again.