MicroStrategy CEO Likens Borrowing to Buy Bitcoin to Investing Early in Facebook

The CEO of business software company MicroStrategy, which holds more than 105,000 bitcoins in its reserves, told CNBC Friday that borrowing money now to buy more bitcoin was like investing in one of today’s dominant tech companies in the early days. 

“If you borrow billions of dollars at 1% interest and invest it in the next Big Tech digital network that you thought was going to be the dominant Amazon or Google or Facebook of money, why wouldn’t you?” MicroStrategy's Michael Saylor said, according to CNBC. “I mean, if I could borrow $1 billion and buy Facebook a decade ago for 1% interest, I think I would’ve done quite well.”

Saylor noted that his company has $2.2 billion of debt and pays about 1.5% interest on that debt. Since last August, his company has financed its purchases of massive amounts of bitcoin using company cash flows, equity issuance, convertible debt, senior secured debt and a $1 billion shelf registration. 

“Our point of view is being a leveraged, bitcoin-long company is a good thing for our shareholders,” he said. 

Saylor also said that the notoriety that its bitcoin purchases have given the company has elevated its brand by a factor of 100. 

MicroStrategy issued its second-quarter earnings report on Thursday, in which it said it planned to continue amassing bitcoin on its balance sheet. For the quarter, the company recorded an impairment of $424.8 million on its bitcoin holdings, since accounting rules force it to do so when an asset's price drops below its cost basis. But appreciation in an asset is only required to be reported once a gain is realized through a sale.

At the end of June, MicroStrategy’s bitcoin holdings were worth $3.65 billion, reflecting bitcoin's market price of $34,763 at the time. The non-GAAP (generally accepted accounting principles) digital asset cost basis of those holdings was $2.74 billion, or $26,080 per bitcoin.

UPDATE (July 30, 19:33 UTC): Updated to add details of impairment charges in the sixth paragraph.