Companies that learned from MicroStrategy and bought Bitcoin aggressively

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

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

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

The risk is transferred to those who later bought MicroStrategy shares. As long as Bitcoin continues to rise, this strategy of issuing bonds to buy coins can be implemented. Since 2020, the stock price of MicroStrategy, which has been buying Bitcoin, has increased more than twenty times.

Seeing the huge profits behind MicroStrategy's bond issuance and cryptocurrency purchase, some companies followed suit. Most of these companies' main businesses are not on the blockchain, and thanks to the purchase of Bitcoin, their stock prices also rose with the rise in Bitcoin prices.

MicroStrategy’s Stock Price – A Bitcoin Price Amplifier

In 2020, MicroStrategy began purchasing Bitcoin, and it became the first U.S. listed company to integrate Bitcoin as a reserve asset.

MicroStrategy’s first announced acquisition included approximately 21,000 BTC, valued at more than $250 million, when Bitcoin’s price was below $10,000.

Initially, it used cash to purchase, but later turned to using the issuance and sale of stocks and convertible bonds to raise funds to purchase

MicroStrategy currently holds more than 380,000 bitcoins. The most recent purchase was of bitcoins worth 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 became a Bitcoin "shadow company". From October 2000 to September 2020, MicroStrategy's stock price remained below $20 per share. As it continued to buy 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 US$20 in 2020. MicroStrategy's stock price has become an amplifier of Bitcoin's price, and its growth in recent years has far exceeded that of Bitcoin.

Micro Strategy 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. Issuance of convertible bonds: MicroStrategy chose to raise funds by issuing convertible senior notes privately to qualified institutional buyers.

2. Attract investors to buy convertible bonds: Although MicroStrategy convertible bonds have a low coupon rate and a high conversion price, they are still attractive to some investors for the following reasons:

a. Low risk: Investors can get back their principal even if the fund is not converted upon maturity, unless MicroStrategy goes bankrupt.

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

3. Use funds to purchase Bitcoin: MicroStrategy will use the funds raised through the issuance of convertible bonds to purchase 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 risk caused by Bitcoin price fluctuations.

V. Synergy and impact of the overall strategy:

a. Stock-coin relationship: The issuance of stocks at a premium to purchase Bitcoin drives up the price of Bitcoin, which in turn increases the company's net assets per share and earnings, forming a positive cycle. In addition, financing to purchase coins accelerates the growth of profits and expands the valuation multiples, prompting the stock price to jump from linear growth to exponential growth, and the market value and stock price increase exceed the price increase of Bitcoin itself.

b. Equity-bond relationship: MicroStrategy's rising market value has pushed it into more indexes, increased trading derivatives, and increased trading volume, reducing the cost of equity and bond financing. Its convertible bonds are uniquely designed, and the option of conversion to equity and cash repayment is in MicroStrategy, avoiding the default problem caused by the inability to repay the convertible bonds at maturity, and essentially becoming a "bond-equity" tool that is friendly to stock prices and shareholders.

c. Currency-debt relationship: Debt is denominated in US dollars, and its purchasing power tends to zero from the perspective of currency standard. However, the initiative of convertibility lies with MicroStrategy. By using this special "debt" to buy Bitcoin, in the long run, as long as the price of Bitcoin rises, the company will have the opportunity to obtain rich returns with controllable risks.

Companies that learn from MicroStrategy

Just buying Bitcoin can increase the stock price 20 times. Countless companies are jealous and have also started to learn 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 to buy 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 for purchasing 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 in 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 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 US$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 US dollars to purchase 14,238 Bitcoin mining machines and 1,408 Ethereum mining machines; in 2023, SOS announced that it would launch 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 mining machines, which will expire on August 20, 2025.

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

Metaplanet:

This is an investment company based in Japan, which mainly focuses on investments in high-tech and innovation fields, especially in artificial intelligence, blockchain technology, financial technology, etc. It 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 said it would issue ordinary bonds (secured) totaling 1.75 billion yen (about $11.3 million) 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 been continuously accumulating Bitcoin as its strategic financial 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.

Boyaa 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:

Tesla has been buying bitcoins continuously since 2021, and will of course sell them when the time comes. According to Arkham data, Tesla holds 11,509 bitcoins.

SpaceX:

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

Block.one:

EOS's parent company is reported to hold as many as 140,000 bitcoins, but the company's actual bitcoin holdings and related investment details are not fully public and transparent.

Block Inc.:

Jack Dorsey, co-founder of a US payment company, announced that starting in April 2024, Block will use 10% of its gross profit from Bitcoin-related products to purchase Bitcoin each month. 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 began buying Bitcoin in April 2021 and reportedly spent a total of about $100 million to buy 1,717 Bitcoins.

Linekong Interactive :

Linekong Interactive, a Hong Kong-listed gaming company, has purchased cryptocurrencies several times since 2023. From June 30, 2023 to July 7, 2023, it purchased 19.3808 bitcoins, with a total value of approximately $590,000. Previously, from June 6 to 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 ecosystem investment management fund.

Bluehole Interactive is actively developing Web3, which has a lot to do with its founder Wang Feng.

Reflection Universe:

This is the parent company of Yingke APP, which is listed on the Hong Kong stock market. In March 2024, it announced that its board of directors had approved a budget of US$100 million for the company to purchase cryptocurrencies on any regulated and licensed trading platform in 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 each 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 between March and August.