Jeff Ross, Founder and Managing Director of Vailshire Partners and Vailshire Capital Management, explains Michael Saylor’s pioneering approach to acquiring bitcoin on MicroStrategy’s balance sheet and why he believes this will make the company the world’s most valuable in less than 10 years.
MicroStrategy [MSTR] is notable for its pioneering approach to balance sheet management. Under the direction of its Co-Founder and Executive Chairman Michael Saylor, it has become famous for investing its excess capital into bitcoin.
For Jeff Ross, Founder and Managing Director of Vailshire Partners and Vailshire Capital Management, this is a revolutionary concept.
“It’s been a relatively insignificant thing to think about in the past,” he says, but “balance sheet management is the most important aspect of company ownership and operations… in the history of companies.
“If you have Chief Financial Officers who don’t have a bitcoin strategy, you’re destined to fall far behind bitcoin-related companies. That’s my personal take,” he tells OPTO Sessions.
Ross’ conviction that the future of company governance revolves around a bitcoin-focused balance sheet management strategy is so strong that he has for some time maintained that MicroStrategy will one day become the world’s most valuable company.
“I’ve said it since about a year and a half ago, back when the price of MicroStrategy was down in the dumps for just a couple of hundred dollars. I said, by 2033, I think MicroStrategy will be the largest public company in the world by market cap.”
While acknowledging that MicroStrategy still has a long way to go for this to play out, Ross highlights its impressive gains in the interim.
In December 2022, MicroStrategy’s share price hit a low of $132.56. Since then, the stock has gained 1081.35%.
“If you believe what bitcoin is going to do, and you see the intelligent beta strategy that MicroStrategy is doing, I don’t see how you can think otherwise. It’s going to grow so much faster than any other company that’s relying on their operating earnings to propel them forward.”
Discover top-performing SaaS stocks in the OPTO app:
| Ticker | Company Name | Market Cap | 1-Year Performance |
|---|---|---|---|
| MSTR | MicroStrategy Inc | $26.33bn | +369.70% |
| HUBS | HubSpot Inc | $34.56bn | +64.87% |
| ORCL | Oracle Corp | $338.73bn | +31.25% |
Data correct as of Friday, 12 April.
Capital Allocation
For investors, says Ross, MicroStrategy offers not only beta compared to bitcoin, but “smart beta”, thanks to Saylor’s influence.
“I think of him as a master capital allocator,” says Ross. “He’s similar to Warren Buffett in the fiat world. To me, investing in MicroStrategy is like jumping on board with Berkshire Hathaway [BRK-B] back in 1970.
“You just trust him that he’s a master capital allocator. He’s in the right place at the right time.”
Elaborating on this, Ross explains that Saylor’s strategy revolves around finding sources of cheap dollars and using these to buy bitcoin. This could involve selling MicroStrategy shares or taking out cheap debt.
This strategy means that MicroStrategy’s reserves of 214,246 bitcoin have been purchased for an average price of $35,160 per bitcoin — 50.19% below its 10 April closing price of $70,587.88.
“He’s super smart,” says Ross. “If, like me, you believe in the long-term success of bitcoin, it's the most obvious thing in the world to do what he's doing.
“I think all companies, public and private, should be following his lead.”
Smart Leverage
Ross elaborates further on the comparison between Saylor and Warren Buffett and explains that this is the source of the company’s beta to bitcoin.
“It’s about the leverage they use, and when they decide to deploy it,” he says. “Lots of companies do stock buybacks, but very few companies do it well.”
Similarly, lots of companies accumulate cash reserves, but few are good at deploying these at opportune moments. Buffett is an exception; Ross points out that, at the bottom of the financial crisis, Buffett was in a position to “buy desperate companies asking for desperate measures”.
In a similar way, explains Ross, Saylor identifies moments when MicroStrategy’s share price is overvalued relative to bitcoin, sells MicroStrategy stock, and uses the proceeds to buy (relatively undervalued) bitcoin.
Saylor issues convertible notes in order to borrow at rates below 1%, and uses the proceeds to acquire bitcoin.
“This is what Saylor is doing, and that’s why I think he’s so brilliant. It’s not leveraged bitcoin; it’s smart leveraged bitcoin.”
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