MicroStrategy, Michael Saylor, and the Bitcoin "Financial Engineering" Strategy

What is MicroStrategy?

MicroStrategy is a publicly traded software company founded in 1989. Its original business is enterprise analytics: software for business intelligence, data visualization, and reporting. Until 2020, that was its core identity.

Since 2020, however, MicroStrategy has become known primarily as a publicly listed proxy for Bitcoin exposure, because the company continually raises capital to buy more Bitcoin and now holds one of the largest Bitcoin treasuries in the world.

Who is Michael Saylor?

Michael Saylor is the co-founder and Executive Chairman of MicroStrategy. He was CEO for decades before stepping aside to focus almost entirely on Bitcoin strategy. Saylor is one of the most vocal Bitcoin advocates globally and is the architect of MicroStrategy's Bitcoin-accumulation plan.

Why Saylor calls it "financial engineering"

Saylor uses the phrase financial engineering to describe MicroStrategy's approach because the company:

• raises capital (equity or debt) at a lower cost than the expected long-term appreciation of Bitcoin
• converts that capital into Bitcoin
• thereby increases Bitcoin per share for existing shareholders

This mirrors classic financial leverage strategies, but applied to a volatile digital asset instead of traditional operating assets.

Essentially, Saylor believes MicroStrategy can use its access to public capital markets to accumulate more Bitcoin faster than ordinary investors.

What is Bitcoin?

Bitcoin is a decentralized digital currency with a fixed supply of 21 million coins. Key properties include:

• no central issuer
• global, permissionless transfer
• a predictable issuance schedule
• long-term scarcity

It behaves like a macro-asset rather than a payment system: many investors treat it as "digital gold".

How MicroStrategy uses debt to buy more Bitcoin

MicroStrategy repeatedly issues:

• convertible notes
• secured or unsecured corporate debt
• new equity offerings

The proceeds are then used to buy Bitcoin. Debt issuance is especially attractive when interest rates are lower than Bitcoin's expected long-term return. Saylor often describes this as using "cheap capital to acquire a superior asset".

This creates leverage. When Bitcoin rises, the value of the company's net holdings grows faster than if it held only its own balance sheet. But leverage cuts both ways.

How the strategy is dangerous

The risks come from:

• Bitcoin volatility: Sharp drawdowns can compress the company's equity value or trigger technical covenants.
• Debt repayment pressure: Future debt maturities must be refinanced or paid off. If Bitcoin is down, refinancing can be costly.
• Concentration risk: The company is now effectively a Bitcoin holding vehicle; its software business is small relative to its BTC position.
• Market dependence: If investors lose confidence, equity or debt markets could become more expensive or closed to the company.

In short, MicroStrategy is running a leveraged Bitcoin strategy. Leveraged bets magnify both upside and downside.

Why MicroStrategy trades at a premium to MNAV

MicroStrategy's stock has often traded well above the market value of its net Bitcoin holdings, even after accounting for its software business.

This premium comes from several perceived advantages:

• access to leverage and capital markets
• expectation of future Bitcoin purchases
• Saylor's public strategy and branding
• scarcity: it is one of few leveraged Bitcoin proxies on public markets
• some investors cannot directly hold Bitcoin but can buy MSTR stock

This creates a structural premium, similar to how closed-end funds or ETFs sometimes trade above (or below) the value of their underlying assets.

What is MNAV?

MNAV stands for MicroStrategy Net Asset Value. It is essentially:

• the market value of the company's Bitcoin holdings
• plus the value of its software business
• minus debt and liabilities

Investors use MNAV to compare the company's stock price to the value of what it owns. When MSTR's price is greater than MNAV, it is said to trade at a premium.