25 years ago, the company that is now known for being the one that has the most bitcoins in the world, jumped to the fame of detonating the bubble of the Puntocom. Microstrategy is now called Strategy and, although the name has recently changed, it has preserved over the years its hallmark: It is a focus of extreme risk. The company sells software since the last century and now, in addition, Bitcoins accumulates above its possibilities. The Pufo in his accounts in the 2000s managed to end up clicking on the bubble of the Puntocom and, on the anniversary of that tragedy, his balance is still very suspicious.
Just in March of the year 2000, the atmosphere was already heating on Wall Street and The specialized publication Barron’s had published an article on March 20 advanceing that dozens of companies were going to run out of cash in the coming months.
The reason was The same that would end up taking Enron a year laterin which it would be the largest bankruptcy of the United States so far: how to assess long -term contracts. In theory, companies had to register income from companies to companies every month, according to their clients they would pay the monthly bill. But technological firms, such as Microstrategy or the aforementioned Enron, as well as a huge list of others that ended up equally razed, had discovered a way of ‘eating one and counting 20’: the assessment at market prices, or ‘Mark to Market’.
With this mechanism, companies could assess a contract of $ 1,000 per month for $ 5 years for the 60,000 dollars that would enter once, and score those 60,000 dollars suddenly in the accounts instead of having to score each income of $ 1,000 when they were charged month by month. A technique that allowed to swell the results with money that, in reality, did not yet existand that, in the best case, it would not be seen for years.
The result is that, as Barron’s warned, Many companies that claimed to be swimming in cash swimming pools did not really have money: The tickets they said to have in the bank were mere promissory notes with future dates and a real risk of finishing anything if any unforeseen occurred in between. And Microstrategy was the first to present some accounts that recognized reality.
Thus, the same day in which the article reached the kiosks, the bleeding began. On March 20, Microstrategy informed the regulator, the US stock and values commission (the SEC), which His accounts were wrong and that he was reviewing them. A year earlier, he had submitted income of 205 million dollars, but now he realized that, that figure would actually range from 150 and 155 million. As for the benefits per action, I was going to go from $ 0.15 to a loss of between 0.43 and $ 0.51. The difference was in those future contracts that they had counted as 100%charged, and that they now recognized that it would take years to enter them.
Then, the CEO and founder of the company, Michael Saylor, tried to calm the spirits: “Our business model has evolved very quickly. Therefore, the contractual relationships we have are complex and include interrelated licenses and services. We want to assure investors, partners and customers who are working hard to comply with the accounting standards that continue to evolve in the software industry,” the company March 20.
His shares, which had gone from $ 7 to 333, 62%collapsed, up to $ 120in a single day. And in the following days he sinks up to $ 63, falling 50% more. By the end of May, the company struggled to keep the $ 20. And by the end of the year, it languished below 10.
TO The SEC did not make any change in the accounts and opened an investigation Against Saylor, his co-founder and operational director, Sanjeev Bansal, and former financial director, Mark Lynch, for accounts manipulation. The three agreed to close the investigation by paying millionaire fines: Saylor had to return 8.2 million dollars for having charged improper benefitsand the three paid a joint fine of one million.
The pump wick
That outbreak was much more serious than it might seem. On March 21, hours after that bleeding, the Federal Reserve uploaded the 25 basic points, up to 6%. That movement caused the type of profitability curve to be invested. The actions bouncing, and the Nasdaq 100 closed that week with increases. But the party was over, and the following Monday there was no gas in the deposit: That day a downhill began that cost him a collapse of 30% in a month.
25 years have passed, and His shares move today around those $ 333, in a curious historical tribute. Someone who bought shares of the firm at the top of that bubble would hardly have recovered his money today.
And in another historic eco, in this anniversary of the bubble of the Puntocom Strategy accounts are equally worrying. The company continues to sell software as then, but that business is not profitable, gives losses. Despite this, the firm buys thousands of bitcoins with money that lifts from the market, borrowing. As reported by the firm in early January, it wants to raise 21,000 million dollars of capital and another 21,000 million for fixed income, and it is. With that money, he is not only buying crypts, but will also cover current expenses. This is very bad signal, since it indicates that He does not have enough money to meet the day -to -day needs, such as the salaries of his employees.
The plans to raise funds make it clear that Saylor’s company has no intention of selling its bitcoins, but quite the oppositewhich aims to continue buying more. The problem is that these assets do not generate performance of any kind and only loss or gain is made when they are sold, something that, for the moment, is not in their plans. That is, the company will not obtain money from software sales, but neither from its investments in Bitcoin if you do not sell them, which is its intention.
In fact, last week, the firm bought 6,911 bitcoins for 584 million dollars at an average price of $ 84,529. Only last quarter, acquired 195,250 bitcoins and, with its last purchases, Its total amount must be around half a million bitcoins, of the total of 19.8 million undermined to date and the 21 million total offer.
Fear in industry?
It is evident that Saylor’s strategy is risky, something that several industry managers recognize. However, there are also those who “are increasingly worried.” OKX president, Hong Fang, the fourth cryptocurrency exchange platform by trading volume, said in an interview with Eleconomista.es: “I respect him [Saylor] already their company and what they have done for promoting Bitcoin. But the other part of me is increasingly concerned about the amount of bitcoins that your company is accumulating, for the leverage and for the role they are playing. Without a doubt, the risk is growing. But the reality is that this is a free market and you cannot prevent people from doing so, if they have the resources and the will to do so. In addition, they are doing it legally … “, admitted.
But the movements that it also makes They use instruments that carry a risk of financial crisis. Without going any further, last month, the company issued preferential participations, a sadly famous instrument in Spain for its incorrect use during the 2009 savings bank crisis. The firm is issuing complex debt to finance, and using its actions to pay those loans, a mechanism that also reminds the Enron of the Bubble times.
If the bitcoin loses value and the crypto mountain that has accumulated ceases to have a latent benefit, or if their actions sink, The firm would have a gigantic problem when returning that mountain of debt. And probably the cryptocurrency would pay it, because the only way to return it would be liquidating all the bitcoins that monopolizes. A sales tsunami that the market could hardly digest.
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