The elegy was published by London’s Economist magazine, telling the sad tale of “Strategy, once a middling software firm named MicroStrategy, [which) is now best known as the world’s largest corporate owner of bitcoin. Michael Saylor, its founder, describes the company as the world’s first digital-credit vehicle, powered by what he calls ‘a bitcoin reactor.’ Now, with the price of the cryptocurrency plummeting, it is something else altogether: an example of hubris, demonstrating the risks of taking on leverage to purchase enormous quantities of a volatile asset.”
Strategy, you see, “owns 650,000 bitcoin, or 3% of the total stock. To fund its buying spree, Strategy has issued equity, convertible bonds and preferred stock with meaty dividends. Until recently, the approach seemed to be paying off. From the start of last year to July, the firm’s share price rose by almost 600%, against a rise of under 200% for bitcoin itself. What could possibly go wrong? Quite a lot, it turns out.”
Strategy now owes about $800 million per year in dividends and interest payments on debt issued. The problem, however, is that “the price of bitcoin has fallen by a quarter since early October. Over the same period, Strategy’s share price has dropped by over 40%.”
