protos.com
With MicroStrategy’s market cap sitting at over $100 billion this morning and a new round of debt being announced almost daily to acquire more bitcoin, many fans have overlooked a critical change inside the company.
For years, Bitcoiners have assumed that CEO Michael Saylor had voting control of the firm. He has now lost that control.
Throughout most of the corporation’s history, a dual share structure separated equity ownership and voting rights. As recently as October 21, Saylor, as executive chairman, held 51.7% of the total voting power of MicroStrategy’s common stock outstanding.
Specifically, Saylor’s overwhelming control of Class B common stock, which outvotes Class A shareholders on a 10:1 basis, maintained his majority control even as his equity exposure dwindled on a percentage basis.
Because one person controlled corporate governance and unilaterally made decisions — such as switching the company’s about-face focus from software to bitcoin acquisition — NASDAQ defined MicroStrategy as a “controlled company.”
Read more: Is retail back or is MicroStrategy only pumping the price of bitcoin?
MicroStrategy no longer a NASDAQ ‘controlled company’
Per NASDAQ governance rules, controlled companies do not have to have an independent board of directors, independent compensation or nominating committees, or independent nominations. MicroStrategy was also not required to have independent directors determine Saylor’s compensation or the compensation of consultants, legal counsel, and other advisors.
However, because MicroStrategy has issued so many shares and debt to buy bitcoin, including today’s upsized round, Saylor’s voting control is now less than 50%. Even though Class B shares outvote Class A shares 10:1, the company has issued so many Class A shares that they now outnumber Class B on a voting basis.
Approximately one week ago, MicroStrategy established a new nominating committee of MicroStrategy’s board led by Carl J. Rickertsen and adopted a new nominating committee charter. Further details about Rickertsen’s nominations and powers granted by the company’s new charter will be released in future SEC filings and disclosed no later than the company’s next quarterly report, due mid-February 2025.
Read more: MicroStrategy investors cheer bitcoin ‘yield’ — but few read fine print
At the end of October, the company announced a staggering $42 billion worth of debt to acquire bitcoin. This morning, because of so much demand, it upsized a $1.75 billion interest-bearing round to $2.6 billion with a 0% coupon.
Deferring all interest payments, participants in this round will only benefit if the price of MSTR increases and they are able to convert at today’s share price at their future conversion date.
The market capitalization of MicroStrategy at publication time is $111 billion and it holds $31 billion worth of bitcoin. It is trading at a 3.55 multiple to this asset. On Monday, that multiple was 2.5.