Does it make sense for companies to hold a lot of cash on their balance sheet? In theory, no-it's better to return the money to shareholders and let them decide what to do. In fact, companies like Apple and Berkshire Hathaway have become huge banks, and investors seem to be pretty good about it.
Some companies are taking this anomaly and running with it - holding Bitcoin instead of US dollars. The President's family business, Trump Media and Technology Group, raised $2.5 billion for this. It joins the liberal streaming platform Rumble, Meme-Stock's favorite GameStop and Elon Musk's Carmaker Tesla. The grandfather of the cryptocurrency library is the strategy - formerly known as Microstrategy, which has $6.4 billion in Bitcoin.
There are three possible reasons why a company may give digital assets (such as Bitcoin). If the price goes up, it is just for the purpose of obtaining it. Apart from being unaware of it, this is easily dismissed. Investors can invest directly or directly in tokens.
A better reason might be that the company thinks it can do something with Bitcoin that investors can't do. In the case of strategy, some things are savvy financial engineering, involving the issuance of convertible bonds and obtaining preferred shares on favorable terms, thereby raising funds to buy more tokens.
Conservative asset manager Strive will be publicly publicly by merging with a public company called Asset Entities, hoping to add his business model to acquire the company in an undervalued cash pile and convert it into Bitcoin. It said it plans to raise up to $1.5 billion and deploy it in a “generate alpha generation” or market strategy.
In some cases, companies claim that Bitcoin is a logical addition to their other businesses. Investors should believe in profits when they see such imprecise opportunities. Rumble wants to provide a crypto wallet. Trump media claims it will generate “synergy of subscription payments, utility tokens and other plans for transactions.”
The third argument is that Bitcoin is the future, so don't think it's stupid. Strive CEO Matt Cole loftyly believes that Bitcoin should be the benchmark for measuring other assets and investments, and the effort is its Berkshire Hathaway. Trump media regards Bitcoin as the "highest tool of financial freedom" and will get rid of harassment from mainstream financial institutions.
It makes all sense for someone who believes in Bitcoin’s supremacy. Companies that use digital tokens to buy will reap amplified returns and happily sail to the point where Bitcoin replaces the dollar as the common language of finance around the world. In this world, fair rewards are old hats. Bitcoin per share is an indicator of pursuit.
Most shareholders of publicly traded companies may still prefer real assets with predictable cash returns. They should see the Bitcoin Treasury trend as: a punt of risk, and an attempt to drive a strategy, whose transactions are worth about 1.6 times the value of its cryptocurrency holdings. Again, the beauty of the market is that every pot has a lid.
john.foley@ft.com