Michael Saylor Bet Billions on Bitcoin in a Surreal Comeback


One Tuesday in August last year, Michael Saylor’s life took a sharp turn.

The 56-year-old CEO of a sleepy enterprise-software company in Virginia suddenly became a business rock star. Saylor began appearing on television news shows, his name mentioned alongside tech visionaries such as Elon Musk and Jack Dorsey, while his company’s long-dormant stock soared.

The fundamentals of MicroStrategy, the business Saylor founded in 1989, were much the same as they’d been for years, except for one thing: On August 11, 2020, Saylor converted virtually all of the company’s cash into bitcoin.

In the months since, Saylor has doubled and tripled down on his bitcoin bet, borrowing more than $2 billion in debt to buy up more of the volatile cryptocurrency. 

“One day billions of people will hold digital property,” he prophesied in an interview earlier this summer. “We want to get there before billions of people get there.” 

Bitcoin, he’s mused on Twitter on other occasions, is “electric money” and “a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth.”

A double-major at MIT, Saylor is “wicked smart,” former colleagues say. Friends describe an ability to parse vast amounts of information and to focus intensely. Once, after buying land to develop in Virginia, Saylor bought “100 architecture books” to sift through, one longtime MicroStrategy associate said. “It’s a level of bandwidth most of us can’t imagine.” 

Saylor’s obsession with bitcoin appears to have come out of the blue, according to several people who have worked with him. So far, it’s paid off handsomely. Within six months of MicroStrategy publicly disclosing its first bitcoin purchase in August 2020, the company’s stock surged from $124 per share to as high as $1,315, riding on the back of the digital currency’s rising price. Today MicroStrategy shares trade around $700, and the company — whose annual revenue has shrunk every year since 2014 — has tripled its market cap to more than $6 billion. 

Saylor knows better than anyone how fleeting stock riches can be. Twenty years ago during the dot-com boom, he took MicroStrategy on another rocket ride that ended with billions of dollars getting wiped out, accusations of fraud, and the company nearly going under.

Saylor’s re-emergence as a bearded crypto king is as much a surreal second act as it is a manifestation of the popular forces reshaping the rules of business. With 1.5 million Twitter followers, Saylor has twice as many as the US Federal Reserve and nearly 10 times as many as Gary Gensler, the chairman of the Securities and Exchange Commission who has vowed to more closely regulate cryptocurrencies. Saylor’s race to load up on bitcoin has injected an element of flair to MicroStrategy, now the largest corporate holder of the cryptocurrency, while at the same time echoing the FOMO mentality that led to the dot-com crash.

Michael Saylor
Twitter

Show less

Michael Saylor
Joe Raedle/Getty Images

Show less

Michael Saylor
Microstrategy

Show less

Saylor declined to be interviewed for this story, and the company did not respond to a list of emailed questions before publication. Insider spoke to a half-dozen former employees who worked closely with the executive over the years, as well as current and former friends, analysts, investors, and corporate-governance experts to understand the man behind the high-stakes bitcoin gamble.

“His vision drives the company,” said the analyst Joseph Vafi, who acknowledged Saylor’s “unconventional” approach the past year. “You are basically investing in Michael’s forward view.”

The man who lost $6 billion

Before his bitcoin bet, Saylor was perhaps best known as the man who lost more than $6 billion in what’s been described as the “greatest single-day hit to personal wealth in capital markets history.” So notable was the loss that it was even featured as a question in the board game Trivial Pursuit.

That day, in March 2000, marked the bottom of a swift fall for MicroStrategy from software darling to dot-com poster child. MicroStrategy was forced to restate its financial-earnings reports, revealing two consecutive years of losses instead of the profits it had previously touted by prematurely booking revenues.


Markets Insider

Show less


Markets Insider

Show less

MicroStrategy’s stock collapsed, triggering an SEC investigation that ultimately resulted in a $10 million settlement for Saylor and two other company executives, none of whom admitted wrongdoing. Saylor, who by that point had become a hotshot business executive in Washington, DC, quipped to The Washington Post that the loss “feels like nothing, actually.”

The response was typical Saylor, former colleagues say: full of self-confidence and bravado. Behind the scenes, though, Saylor was “shell-shocked,” people who worked with him at the time said.

Saylor founded MicroStrategy at 24. He grew up on military bases, his mother the daughter of a country musician and his father an enlisted Air Force veteran. As a teen he wanted to be a rock star until he realized most musicians don’t make much money. His next choice, to be a fighter pilot or astronaut, was dashed by a benign (and ultimately erroneous)

heart-murmur
diagnosis.

After studying the history of technology as well as aeronautics and astronautics at the Massachusetts Institute of Technology, Saylor launched his business career with a gutsy move: While working as a computer-simulations programmer at the chemical giant DuPont, Saylor quit and proposed that DuPont hire his brand-new startup to do the work instead. He got a contract — and even persuaded DuPont to fund his startup. 

After MicroStrategy’s stock crashed in 2000, Saylor kept the business alive through the sheer force of his personality and his “tenaciousness,” according to one former MicroStrategy executive who worked closely with Saylor. “The company should not have survived. It should have died,” the former employee said.

Saylor, working alongside the MicroStrategy board member Rick Rickertsen, who people close to the company describe as a father figure to Saylor, laid off hundreds of employees in the months that followed. The cutbacks, along with an aggressive reverse

stock split
in early 2002 that dramatically reduced the number of MicroStrategy shares, jump-started the company’s recovery.

‘Mind-blowing frustration’

Many former MicroStrategy executives spoke highly of Saylor’s business acumen, citing a litany of instances when he proved to be ahead of the curve. Noteworthy examples include the shift away from mainframe computing in the ’90s, which for many of MicroStrategy’s Fortune 500 and government-agency clients was a revelation; the embrace in the early aughts of mobile computing — at one point Saylor gave iPads to MicroStrategy executives in an effort to speed the development and adoption of mobile software — and early investments in Amazon and Apple. Facebook was an early adopter of MicroStrategy’s core analytics software.

Saylor’s crusading style can rub some the wrong way. Former colleagues say he can be notoriously difficult to work with, with a penchant for micromanaging and burning through top executives. In 2014 MicroStrategy’s C-suite and board of directors were both overhauled as Saylor faced pressure to step down from investors who argued his headline-grabbing parties and adventures on his yachts (he had three) were a distraction from a sagging share price. That Saylor was able to defend his position during tense board meetings and subsequently rearrange MicroStrategy’s most senior executives was thanks in large part to a dual-class share structure that gives Saylor complete control of the company.

“Michael has a brilliant mind and a seemingly infinite capacity for detail and precision. Working with him over the long term takes a special person,” Marge Breya, a former chief marketing officer who briefly served on MicroStrategy’s board, told Insider.

“There are some great people at MicroStrategy who have mastered that art. For me it was a mix of intellectual entertainment and mind-blowing frustration,” Breya said, declining to elaborate further.

The day after Thanksgiving in 2013, Saylor abruptly ejected his cofounder and MIT classmate Sanju Bansal from MicroStrategy’s board, after what one former employee described as a heated argument between the two men. Bansal was removed from the board “without cause, effective immediately” by a stockholder action filed by an LLC wholly owned by Saylor.

Within the insular Washington, DC, community, Saylor gained notoriety for his parties, including a costume-themed “Rocktoberfest.” Along the way, Saylor migrated some of his social life to Miami Beach, Florida, where he purchased an 18,000-square-foot mansion dubbed “Villa Vecchia” and was known to dock one of his multiple yachts.

“The attention to detail he put into that as a hobby, the detail of the furniture configurations — you could see it was a passion project for him,” said David Rennyson, a former chief revenue officer at MicroStrategy, referring to Saylor’s first yacht. He and other company executives was occasionally invited to dinner on the boat. “He is as intense off the job as he is on the job. The hobbies he can do are a bit ‘next league’ for most of us.”

Laser eyes and cryptic quotes

Saylor’s current infatuation with cryptocurrency appears to fit right into that pattern, even if its origins are hazy. 

None of the former MicroStrategy employees interviewed for this story said they could recall Saylor ever discussing cryptocurrency at the office. In one of his rare past public comments about cryptocurrency, in 2013, Saylor tweeted that “#Bitcoin days are numbered,” likening it to online gambling.

Analysts who closely monitor Saylor’s Twitter feed point to the influence of Eric Weiss, CEO of the Miami Beach-based Bitcoin Investment Group. Weiss claims to have “orange-pilled” Saylor, slang for opening someone’s eyes to bitcoin’s potential. Saylor thanked Weiss on Twitter recently as “the person that got you into bitcoin,” a level of acknowledgement former MicroStrategy executives say Saylor rarely shows anyone. (Weiss did not respond to interview requests for this story.)

Since catching the bitcoin bug, Saylor’s public persona has undergone a remarkable transformation. Saylor’s Twitter feed, complete with the “laser eyes” profile picture that’s de rigueur for crypto devotees, is a daily stream of gnomic utterances (Bitcoin is “money that isn’t broken” behind a “wall of encrypted energy”) and quotes from famous historical figures punctuated with bitcoin hashtags.

Dressed in a black shirt with the top button undone and often standing in front of a giant gold bitcoin sculpture, Saylor is a frequent guest on cable-news programs and crypto-industry podcasts and a marquee name at cryptocurrency conferences. He talks at length, in 10-plus-minute monologues, about the expanding monetary supply and the “crypto asset network.” But the gist of his bitcoin bet boils down to a simple land-grab premise: The world is moving to bitcoin, and there’s only a finite amount of bitcoin that will ever exist. Whoever accumulates the most, wins.

“It’s probably the most compelling opportunity I’ve seen in my lifetime,” he said in February.

Saylor’s stature among crypto investors got a boost later that month, when Tesla purchased $1.5 billion in bitcoin. The move came several weeks after Saylor had tweeted at Elon Musk to suggest that Tesla convert its cash balance into bitcoin. (Musk did not return a request for comment about Saylor’ influence in Tesla’s decision to invest in bitcoin.)

Musk has since expressed concerns about how energy-intensive bitcoin mining is, and Tesla canceled its decision to let customers pay for its cars in bitcoin. But Saylor has steadfastly insisted that bitcoin is a more energy-efficient way to get a return on capital than any other business. And in May Saylor tweeted that he had hosted a meeting with Musk and major North American bitcoin miners to form a council dedicated to sustainable bitcoin-mining efforts. 

Turbulence ahead

Sitting on white leather chair on stage in Miami, Saylor reassured a rapturous crowd that bitcoin critics were misguided. 

“They all just criticize something that they don’t understand that’s new,” Saylor said at the Bitcoin 2021 Miami conference in early June. Worse, he said, the critics were standing in the way of a technology with the potential to improve the lives of people in impoverished countries. “If you don’t give a constructive solution to the problem then you’re just reflexively rejecting a new thing,” he said. (El Salvador’s president beamed in via videolink during the same conference to announce a plan to make bitcoin a national currency,which went into effect on Tuesday).

Michael saylor, dressed in all black, sits on a white couch, next to another man in all white, with a giant orange Bitcoin logo behind them.

Michael Saylor Miami bitcoin conference

Joe Raedle/Getty Images


Thanks to his supervoting shares — he owns some 70% of voting shares — Saylor has the luxury to ignore critics and to plunge MicroStrategy headfirst into bitcoin. MicroStrategy owned 108,992 bitcoin, worth about $5.3 billion, as of mid-August, and Saylor shows no sign of easing up on his buying binge.

“If you own MicroStrategy outright, you do have to be a bull on bitcoin. And the cryptocurrency right now makes up the majority of the company’s value,” said the analyst Kamil Mielczarek, adding that today, MicroStrategy’s core software product accounts for only about 20% of the company’s value.

It’s impossible to compare MicroStrategy’s dramatic shift, analysts say, because there simply aren’t other companies who have followed Saylor’s playbook. While other high-profile tech execs have invested company cash into crypto — Tesla’s Musk and Square’s Jack Dorsey are among the best known — none has lashed their business’s fortunes to bitcoin the way that Saylor has.

And unlike most publicly traded companies, at MicroStrategy there isn’t any one voice — be it a board member, fellow executive, or investor — to push back against Saylor and tell him “no.” 

MicroStrategy has the worst possible score on overall corporate governance from the proxy advisory firm Institutional Shareholder Services, which notes particularly poor governance of both shareholder rights and audit and risk oversight. Among the 3,000 largest publicly traded companies in the United States, only one, Vicor, features the same level of founder control, with the CEO also serving as the board chair with no board nominating committee in place, ISS Executive Director Jun Frank said.

“If you have a CEO who answers to nobody — and particularly a CEO who was involved in some really sketchy accounting practices, and he didn’t lose his job … if that’s not a warning that this is something like that could happen again, I don’t know what is,” said Howard Schilit, the forensic accountant who first noticed in late 1999 the unusual accounting practices that caught the eye of the SEC.

For all the bullish bitcoin tweets Saylor sends daily, former SEC officials and accountants say MicroStrategy isn’t under any formal obligation to immediately disclose any future sale of its bitcoin holdings (Saylor has said repeatedly in recent months that he has no plans to sell). Instead, any disclosure would be at the discretion of the company, based on whether it deems the sale to be “material” information.

To Schilit, Saylor’s bitcoin binge has parallels to the run-up of the stock price during the dot-com bubble.

“I don’t like when somebody says, ‘Hey, I’m going to completely change the nature of what I do. And the rationale for it is, ‘I can get you a good deal doing it,'” Schilit said. 

Because of bitcoin’s inherent volatility, one aspect of MicroStrategy that investors will have to contend with moving forward are unpredictable impairment losses. In the second quarter alone, the company recorded some $425 million in impairment losses. While the company’s total bitcoin holdings are now valued over $2 billion more than the overall cost of its investment in the cryptocurrency, frequent fluctuations in bitcoin price mean that different batches of MicroStrategy’s previously acquired coins can be above or below the purchase price in a given quarter.

A recent Citi note to investors flagged the potential that Saylor’s bitcoin purchases “could have a negative impact” for MicroStrategy and could “be a dealbreaker for software investors, who may fear they now own a more risky asset-management business.”

Saylor has argued that exactly the opposite is the case, describing his bitcoin fame as a marketing tool that brings attention to MicroStrategy’s data-analytics business and helps drive sales. The company’s revenue has grown in each of the past two quarters, and Saylor says employee morale is better than ever.

How well the investment, and MicroStrategy, fare in the long run could depend on something Saylor can’t control: government regulation. The freewheeling crypto market in which Saylor rebooted his career is almost certain to become more regulated, analysts say. Leading the charge is the new SEC chair, Gensler, who previously taught a “blockchain and money” course at Saylor’s alma mater, MIT. 

While bitcoin itself is generally considered a commodity rather than a security under existing US laws, there are countless gray areas, including how to regulate bitcoin futures that trade on automated exchanges. And Congress also has its sights on cryptocurrency reforms.

Saylor has tweeted that regulation will be positive for bitcoin by bringing certainty to the market and making institutional investors more comfortable with digital assets. But if anyone knows how unpredictable life can be, it’s Saylor.

“I was ready to quietly retire. I had not posted on Facebook, not posted on Instagram, not posted on Twitter for four years,” Saylor told the audience at the Miami conference in June. “Then bitcoin happened to me and I got dragged into the limelight again.”





Source link