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- MicroStrategy’s Business Intelligence software is used by many large corporations, such as WalMart.
- MicroStrategy has intentionally let the software business slow down to focus on Bitcoin (BTC) acquisition, making it the largest publicly traded holder of Bitcoin tokens.
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It is rare, but not unheard of, for a successful large corporation to change its business model to focus on a totally unrelated business. One example is the largest European paint and coatings company, Akzo Nobel, which ruled the rayon and other polyester fabric world from the 1960s through to the early 1990s. It decided to shed its textile and PVC related businesses to focus exclusively on paints and coatings, which it has done since 1994.
The enigma that is MicroStrategy (NASDAQ: MSTR) is a polarizing one, since the stock price continues to rise on tangible assets, despite its core business losing money in its quarterly reports.
Business Analytics in the Cyber World
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MicroStrategy was founded in 1989 by Michael Saylor and two other partners. As the burgeoning use of computers began to pervade ubiquitously to all businesses large and small, Saylor found a niche need. The data from all of the increased volume of transactions and other computer uses for internal operations held value if it could be compiled and analyzed for trends, deficiencies, and other business aspects. The data mining and business intelligence analytical software became the core of MicroStrategy.
Launching from an initial $10 million consulting contract from McDonald’s (NYSE: MCD), MicroStrategy would quickly grow, competing head-to-head with rivals in the Business Intelligence field like Oracle, IBM, and SAP. The company went public in 1998. MicroStrategy Platform Analytics clients include: Amazon.com (NASDAQ: AMZN), WalMart (NYSE: WMT), Apple (NASDAQ: AAPL), CVS Health (NYSE: CVS), and Cencora (NYSE: COR).
Saylor would helm the company as CEO until 2022, when he stepped down to remain as Executive Chairman. The reason for his decision remains controversial: it was to further pursue his obsession with Bitcoin.
The Bitcoin Factor
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In 2020, Saylor was introduced to Bitcoin, and he became a devoted follower of the cryptocurrency. Saylor was convinced that “the Bitcoin sail” was the key to avoid sitting on inflation devaluing assets like US dollars. He began acquiring Bitcoin for MicroStrategy’s account early on, and as of April 2024, it held over 1% of circulating Bitcoin supply, which had an estimated value of $13.6 billion. 24/7 Wall Street has followed MicroStrategy and its Bitcoin connection in past articles.
As a result, MicroStrategy’s image has changed from being a premier Business Intelligence software company to being viewed as a Bitcoin proxy company. It was the first publicly traded company to invest in Bitcoin, and it has continued to allocate profits into greater accumulations of Bitcoin tokens.
Despite the change of focus, Saylor’s Bitcoin bet has been successful, if stock price and market cap are the arbiters. Over the past five years, MicroStrategy’s stock price has risen over 1,000%. This continued rise in market cap has led to a recent announcement that MicroStrategy will be added to the Russell 1000 Index. Although the company reported a recent loss, there are several upcoming developments and changes that could potentially propel MicroStrategy for inclusion in the S&P 500.
Reasons For A MicroStrategy Stock Split Announcement
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MicroStrategy has been criticized for a dearth of R&D announcements in its core analytics software IP, as opposed to the Bitcoin associated publicity. However, there have been new developments, along with some other factors that could warrant a MicroStrategy forward stock split announcement, as the company’s prospects may continue to advance.
- At its MicroStrategy World 2024 event in May, it was reported that, “the majority of attendees built an AI bot with the recently released Auto Express, which is the trial version of Auto, a lightweight, embeddable bot that eliminates the need to train a custom bot on customer data. As a result, customers can embed data-driven AI assistants into any application, anywhere they are needed, to leverage any data. Auto runs on AWS, a World 2024 Titanium sponsor.” Some analysts have noted that this exciting new AI bot could make a case for MicroStrategy to be also viewed as an AI company.
- The SEC’s approval of an Ethereum ETF has generated much buzz as to the growing acceptance of cryptocurrency, which would help to mitigate negative dismissals of MicroStrategy as “only a Bitcoin proxy” and remake its profile as a premier Business Intelligence and Analytics company with ample tangible cryptocurrency assets. The resultant boost to Bitcoin would also increase MicroStrategy’s holdings prorata.
- MicroStrategy reported a net operating loss of $53.1 million for Q1 2024. This was due to a digital asset impairment charge of $191.6 million. MicroStrategy has yet to adopt a new digital asset fair value accounting standard. If it had, Bitcoin’s rally in early 2024 would’ve given it a sizable profit, instead of a loss.
- The last stock split undertaken by MicroStrategy was a 2002 1-for-10 reverse stock split. At the time of this writing, the stock price was in the $1,670-$1,700 range, up about 89% from the start of 2024. While Bitcoin bulls might find that price affordable relative to buying Bitcoin directly at $68,000, it is still out of the range of a majority of individual equity investors. A 10-for-1 forward stock split would be equivalent to giving ten dimes for a dollar. However, a $167 share price with the aforementioned upside prospects from both AI and Bitcoin would be very attractive to cryptocurrency and equity investors alike.
In the view of several analysts, MicroStrategy’s Russell 1000 inclusion announcement may be a foreshadowing of a future S&P 500 inclusion, if the company were to implement the new accounting standard and boost software sales through its new AI powered Auto Express platform.
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