Pierre Rochard and Phong Le explore valuing Bitcoin treasury companies and the rise of corporate Bitcoin adoption in this insightful discussion.
Timestamped Overview
00:00 – Intro: How to Value a Bitcoin Treasury Company
01:28 – Phong Le on Strategy’s Bitcoin Thesis
04:45 – Why MSTR Isn’t Just a Tech stonk Anymore
08:12 – The Role of FASB Accounting in Bitcoin Adoption
11:39 – Capital Markets: Equity, Debt & Bitcoin
15:20 – Convertible Bonds & Leveraged Bitcoin Exposure
19:05 – What Investors Miss When Valuing MSTR
23:34 – How Institutions View Bitcoin on the Balance Sheet
27:48 – Risks, Volatility, and Shareholder Expectations
32:15 – Bitcoin’s Role in Long-Term Corporate Strategy
36:20 – Advice for Other Bitcoin Treasury Companies
39:12 – Building a Bitcoin-Backed Capital Market
43:10 – Addressing Bitcoin Volatility in Financial Products
46:00 – Why STRF Is Gaining Market Traction
48:30 – Final Thoughts from Phong Le
Key Takeaways
1. Introduction and Recent Corporate Bitcoin Adoption
- Figma’s IPO filing and Bitcoin treasury announcement
- Comparison to MicroStrategy’s own journey
- Rationale behind corporations preferring Bitcoin over cash
2. Background and Origins of MicroStrategy’s Bitcoin Strategy
- Brief company history (enterprise analytics roots)
- Financial status circa 2020 (revenue, cash flow, operating margins)
- Impact of COVID-19 on business and capital management
- The decline of interest income due to Fed rate cuts
- Concerns over monetary inflation and cash devaluation
3. Decision-Making Around Corporate Treasury Management
- Traditional uses of cash (R&D, acquisitions, stonk buybacks)
- Limitations and inefficiencies found in typical corporate strategies
- Analysis of failed M&A in the software sector
- The rationale for holding large cash balances and liquidity considerations
4. The Pivot: Bitcoin as a Treasury Asset
- Realization of Bitcoin’s effectiveness relative to cash/treasuries
- The macroeconomic environment and its role
- Comparative analysis of balance sheet options
5. Broader Trends in Corporate Bitcoin Adoption
- Why most companies haven’t yet adopted Bitcoin
- Common attitudes towards Bitcoin in corporate and personal circles
- Demographics and mindsets of Bitcoin adopters versus skeptics
6. Flexibility and Optionality: Holding Cash vs. Holding Bitcoin
- Option value analogy in treasury management
- Bitcoin’s potential as a long-term ‘option’ asset
- Divergence from traditional cash management strategy post-2020
7. Transition: From Simple Treasury to Capital Markets Innovation
- Evolution from balance sheet management to issuing Bitcoin-backed securities
- Convertible notes: initial issuance and market response
- Discovery of market demand for Bitcoin-backed equity and debt products
8. Creation and Growth of Bitcoin-Backed Securities at MicroStrategy
- Details on convertible, secured, and margin loan instruments
- Emergence/innovation of the perpetual preferred shares (STRD, STRF, STRK)
- Role of market conditions, opportunity, and agility in corporate financial strategy
9. Shareholder Engagement and Tender Offer
- Tender offer to allow traditional shareholders to exit
- The positive response from shareholders willing to stay
10. The Mechanics and Rationale for NAV Multiples
- Explanation of net asset value (NAV) and company valuation traditions
- Justification for NAV/EBITDA/revenue multiples in high-growth businesses
- How these concepts apply to Bitcoin treasury companies
11. Comparing Bitcoin Treasury Companies to Tech Industry Historical Trends
- Analogy to Microsoft and the broader tech sector in the 1980s
- Overcoming valuation skepticism in new markets
12. Assessing Competitive Moats in Bitcoin Treasury Businesses
- Narratives about ease of entry vs. actual competitive advantages
- The uniqueness of B2B Bitcoin access and securitization
- Institutional versus retail adoption dynamics
13. Preferred Securities: Product Design and Market Performance
- How MicroStrategy’s preferreds address Bitcoin volatility for conservative investors
- Retiree and fixed income market appeal of preferreds
- Price action observations and supply/demand discussions
14. Criticisms and Corporate Finance Considerations
- Clarifying how dividends are paid (operating cash flow, asset sales, or new capital)
- Bitcoin yield and bitcoin gain as crucial KPIs
- Mathematical logic behind preferred issuance being more accretive than equity
15. Bitcoin’s Price Appreciation and Balance Sheet Growth
- Discussion on returns, appreciation not being necessary for value creation
- The impact of up-front gain capture with Bitcoin purchases for preferred holders
- Corporations starting to diversify with Bitcoin
16. The Future of Corporate and Institutional Bitcoin Treasury Adoption
- Early days of non-Bitcoin-native companies adding Bitcoin to balance sheets
- Figma as an adoption example
- Potential for incremental adoption among large tech firms (Apple, Google, etc.)
17. Macro Environment and Strategic Considerations
- The role of interest rate environments and timing in MicroStrategy’s decisions
- The resilience of Bitcoin in varied macroeconomic scenarios
18. Index Inclusion and Future Capital Market Dynamics
- Benefits of being included in major indices (e.g., S&P 500, NASDAQ 100)
- What this means for market awareness, passive investing demand, and sector legitimacy
19. Closing Thoughts and Acknowledgments
- Recap of innovations and the ongoing journey
- Gratitude towards team efforts and capital market trailblazing
Notable Quotes
Competitive Moats in Bitcoin Treasuries
It's so easy to start a bitcoin treasury company? There's no moat... those narratives don't hold up ultimately because there are other factors that do create a moat.
Phong Le @digitalphong
Explaining NAV Multiple
This concept of companies being valued greater than their asset value or greater than the discounted cash flow is not an uncommon thing... people call it alchemy, I call it valuation.
Phong Le @digitalphong
Risk-Return of Bitcoin
When we decided to put Bitcoin on our balance sheet, the primary reason was it was liquid, it was novel, it's an excellent technology. And the risk return ratio, or the return risk ratio is asymmetric.
Phong Le @digitalphong
Bitcoin Revolutionizing Balance Sheets
Bitcoin is the answer now, why haven't more companies done it? Because they haven't figured out that bitcoin is the answer... it's really revolutionized the way people think about balance sheet management and they think about holding capital on their balance sheet.
Phong Le @digitalphong
Adopting Bitcoin as Treasury Asset
On August 10th of 2020, we came to announce that we were going to use Bitcoin as our primary treasury reserve asset.
Phong Le @digitalphong
Monetary Debasement Wake-Up Call
Over the course of about three months, from April to June of 2020, the Fed printed about $5 trillion on a $20 trillion monetary supply... it became very obvious that when you take a $20 trillion monetary supply and you print $5 trillion that our $500 million was going to be worth 25% less.
Phong Le @digitalphong
Bitcoin Adoption by Companies
I think one of the most more interesting announcements in the last week was Figma puts out there in their S1 as they're filing for an IPO that, lo and behold, they have about 5% of their balance sheet in bitcoin. And here's a private company not trying to be a bitcoin treasury company.
Phong Le @digitalphong