Is Microsoft also going to invest in Bitcoin?

Author: Tuo Luo Finance

Public companies are catching the Bitcoin fever.

Recently, Bitcoin has undoubtedly become the darling of the financial market once again. Just yesterday, Bitcoin surged to $73,660, just 0.4% short of the historical high of $73,881.3 set on March 14 this year. Against the backdrop of Trump's rising chances, the market generally predicts that Bitcoin could reach $100,000 by the end of the year.

It seems that public companies have also set their sights on this lucrative opportunity. Recently, Microsoft stated in a document submitted to the U.S. Securities and Exchange Commission (SEC) that it will vote on the topic of "evaluation of Bitcoin investment" at the shareholder meeting on December 10. Although the board has proposed to oppose this proposal, shareholders have differing opinions.

As one of the most well-known companies globally, it is undeniable that Microsoft's mere consideration of BTC investment carries more profound significance. On the other hand, MicroStrategy, which has long taken action, has made a significant profit from the dividends and has provided an important lesson for public companies.

01. Microsoft Proposes Bitcoin Investment? Board Opposes

Influenced by Trump's trading, Bitcoin has once again garnered various envious glances recently. Although it slightly retreated after being just a step away from its historical high on October 30, Bitcoin, which has risen over 56% this year, has outperformed global asset classes, including large-cap growth, mid-cap growth, U.S. and European stocks, commodities, government bonds, gold, cash, emerging markets, and real estate investment trusts, showcasing its high anti-inflation and anti-cyclical characteristics.

"Digital gold" has been solidified, and not only retail investors are FOMOing; public companies with more capital are naturally interested again. According to documents submitted to the SEC on October 24, Microsoft seems to have investment intentions in Bitcoin. The company has included the topic of "evaluation of Bitcoin investment" in the voting agenda for the next shareholder meeting on December 10.

The proposal was initiated by the conservative think tank National Center for Public Policy Research of Microsoft's '2025 Project' advisory committee, suggesting that Microsoft invest at least 1% of its total assets in Bitcoin, arguing that "companies should consider Bitcoin as a hedging tool to protect shareholder value." From a price performance perspective, this statement is indeed true, and asset allocation diversification is also reasonable. However, the proposal has been marked by Microsoft's board with a note stating, "Recommend voting against this proposal."

Microsoft pointed out that the board has shown opposition to the proposal, believing that voting is unnecessary and stating that it has fully considered the proposal. The document describes, "Microsoft's global finance and investment services team has conducted a comprehensive assessment of various investable assets, aiming to provide funding for Microsoft's ongoing operations, which includes assets expected to provide diversification and inflation protection, as well as assets that can reduce the risk of significant economic losses caused by rising interest rates. In past assessments, Bitcoin and other cryptocurrencies have been considered, and Microsoft will continue to monitor trends and developments related to cryptocurrencies to inform future decisions."

As for the basis for consideration, Microsoft also provided an explanation, emphasizing that volatility is a key factor that must be taken into account when assessing cryptocurrency investments. In other words, Microsoft believes that while crypto assets may be good assets, it does not completely exclude them; however, the evident extreme price volatility of Bitcoin would impact the balance sheet of public companies and is not a stable asset choice.

Of course, although the board has condemned Bitcoin, the final decision on the proposal clearly does not rest with the board but with the attitudes of the majority of shareholders. According to data disclosed by Tonghuashun, Vanguard and BlackRock are currently Microsoft's largest institutional shareholders, holding 8.95% and 7.30% of the shares, respectively.

For BlackRock, the crypto field is no stranger; it has launched Bitcoin and Ethereum spot ETFs this year. As of October 30, BlackRock's Bitcoin exchange-traded fund IBIT has surpassed a market value of $30 billion, performing the best among the first Bitcoin ETFs. In an interview on October 15, BlackRock's chairman and CEO Larry Fink emphasized that "Bitcoin itself is an asset class; it is an alternative to other commodities like gold."

Although BlackRock has expressed support for Bitcoin, another shareholder, Vanguard, has a less friendly attitude. Earlier this year, Vanguard explicitly stated that it would not allow its clients to purchase any of the 11 launched spot Bitcoin ETFs and mentioned that Vanguard has no plans to offer a Vanguard Bitcoin ETF or other crypto-related products, stating, "Our view is that these products are inconsistent with our focus on asset classes like stocks, bonds, and cash, which Vanguard considers the cornerstone of a balanced long-term investment portfolio."

With two major shareholders at odds, smaller shareholders will undoubtedly have their own calculations, making the final voting outcome difficult to predict. However, it appears that Microsoft shareholders have already begun preliminary voting on this proposal. If the vote is successful, Microsoft, as an industry benchmark, will further strengthen the public perception of Bitcoin in the market and trigger a chain reaction, promoting Bitcoin's inclusion in the financial strategies of more public companies, thereby reinforcing its digital gold positioning and significantly advancing the mainstreaming process of Bitcoin. On the other hand, even if the vote fails, Microsoft's consideration will still have a profound impact on the industry, as one of the largest public companies in the world has shown interest in Bitcoin, which is a strong testament to Bitcoin's entry into the mainstream.

02. Public Companies Investing in Bitcoin is Not New

In fact, looking solely at public companies, investing in Bitcoin is not a new phenomenon. According to Coingecko data, there are currently 29 public companies holding Bitcoin, with a total of 360,000 Bitcoins worth over $2.6 billion. Among them, the most representative is undoubtedly MicroStrategy.

Going back to August 11, 2020, MicroStrategy first announced its entry into the Bitcoin space, purchasing 21,454 Bitcoins for $250 million, officially incorporating Bitcoin into the company's diversified asset portfolio. This move caused a huge stir in the market at the time and marked a critical "1995 moment" for Bitcoin.

In the following years, whether rising or falling, MicroStrategy has steadfastly adhered to one principle—buy and hold Bitcoin. Since 2020, MicroStrategy has firmly executed this strategy, and by the third quarter of 2024, it had acquired 252,220 Bitcoins for approximately $9.9 billion, becoming the public company with the most Bitcoin holdings globally. In a recent financial report, MicroStrategy stated it would continue to execute its strategy, raising $21 billion in equity and issuing $21 billion in bonds over the next three years, using additional capital to purchase more Bitcoin as financial reserve assets to achieve higher returns.

It has been proven that in this gamble on Bitcoin, MicroStrategy has emerged as the biggest winner. MicroStrategy's average purchase price for each Bitcoin is approximately $39,266, while Bitcoin has now soared to $72,000. From a stock performance perspective, MicroStrategy has skyrocketed to $247.31, reaching a new high in 25 years and successfully entering the $50 billion market cap club. According to Bloomberg, MicroStrategy's stock performance over the past two years has outperformed almost all major U.S. stocks, including Nvidia, with the report emphasizing that the company's "unconventional" decision to buy Bitcoin four years ago to hedge against inflation has driven a surge of over 1,700%.

MicroStrategy's strategy has thus gained significant popularity. Overseas KOL Glenn Hodl pointed out that under the current valuation model, MicroStrategy is highly dependent on BTC, resulting in two valuation models: one based on the discount value brought by its business system growth and the other based on the current value of BTC itself. As long as there is a future premium expectation for Bitcoin, MicroStrategy can continuously increase its market value by adjusting the proportion of Bitcoin holdings to stock issuance. With this successful example, other companies are also eager to follow suit; for instance, the Luxembourg digital securities market STOKR has stated it will actively expand its Bitcoin reserves in the coming years, following MicroStrategy's lead.

In addition to MicroStrategy, another well-known company, Tesla, also holds a significant amount of Bitcoin. Tesla's first Bitcoin purchase was in February 2021, when it bought $1.5 billion worth of Bitcoin. In the same year, Musk even stated that Tesla could be purchased with Bitcoin, but later backed off due to extreme price fluctuations. As of the third quarter of 2024, Tesla's financial report disclosed that it holds $763 million worth of Bitcoin, ranking fourth among public companies, behind MicroStrategy, Marathon, and Galaxy Digital.

It is worth noting that although Tesla made large transfers in the third quarter, transferring $75.18 million, $76.08 million, and $77.16 million worth of Bitcoin to anonymous wallets, there has been no indication of selling. This means that since reducing its holdings by 75% in the second quarter of 2022, Tesla has not sold any Bitcoin for two consecutive years, demonstrating Musk's long-term bullish sentiment on Bitcoin. Coincidentally, SpaceX also holds approximately $560 million worth of Bitcoin, with the two companies collectively owning about 19,788 Bitcoins, totaling approximately $1.3 billion in market value.

03. Conclusion

Returning to the main topic of Microsoft, overall, given the current attitude of the board, Microsoft's vote on Bitcoin is more symbolic than practical. However, from a long-term perspective, as Bitcoin's value grows and the mainstreaming process advances, Bitcoin, as one of the diversified asset allocation targets, will increasingly be held by public companies. But for now, the volatility of Bitcoin and compliance issues still pose significant challenges for public companies.

On a positive note, there has been some loosening in compliance in the U.S., with changes in accounting standards being a typical example. At the end of last year, the Financial Accounting Standards Board (FASB) in the U.S. issued new regulations, officially adopting fair value accounting for Bitcoin starting from the fiscal year beginning after December 15, 2024. Before this change in accounting method, holders of Bitcoin in public companies had to account for impairment losses, but could only record appreciation at cost price. This was undoubtedly a significant obstacle for public companies eager to present impressive financial reports. After the change, Bitcoin can be recorded at market fair value, resolving this issue.

Thus, it can be seen that the ship of public companies investing in Bitcoin may be about to set sail.