Michael Saylor on Bitcoin Treasury Strategy and Risk Metrics

Michael Saylor, founder of MicroStrategy, shares his insights on how Bitcoin treasury companies can measure and value their common equity. He introduces various metrics to evaluate the relationship between Bitcoin and share value, arguing that not all debt is equal and that this can have significant implications for returns.

Bitcoin is available at OKX and Bybit.

Conservative Risk Metrics for Bitcoin Companies

Saylor explains that BPS (Bitcoin Per Share) indicates how much Bitcoin is available per share before creditors get their claims. This shows how quickly common equity grows. CEBE BPS, on the other hand, measures Bitcoin per share after deducting all debt and preferred shares. He considers the latter to be the conservative risk metric because it provides a more realistic picture of what shareholders actually own.

The two metrics can diverge significantly, depending on how much debt a company has and what that debt costs. Saylor argues that the difference between the two metrics shows how debt can act as a lever, causing shareholders to make more profit or incur losses.

Debt Can Increase or Decrease Returns

The type of debt matters a lot, says Saylor. Short-term, high-cost debt can cause the leverage to work negatively, making returns fall below Bitcoin’s performance. But long-term, low-cost debt can have the opposite effect: it amplifies shareholder profits.

If the annual return on Bitcoin assets is higher than what the company pays for its debt, then a well-financed Bitcoin treasury company can outperform Bitcoin itself. This is the core idea behind why some companies strategically use debt to increase their Bitcoin position.

Practical Implications for Investors

For investors in Bitcoin treasury companies, these insights are relevant. They should not only look at total Bitcoin holdings but also at the cost structure of debt. A company with a lot of expensive debt can underperform despite large Bitcoin reserves, while a company with cheap, long-term financing can do better than Bitcoin itself.

The Bitcoin price is currently moving around $64K, with a gain of 0.3% in the past 24 hours. This underlying value forms the basis for how treasury companies value their own shares, depending on their debt structure and financial strategy.