Value Investor Bill Miller Buys MicroStrategy Debt for the Bitcoin

In short

  • Bill Miller is a value investor who likes Bitcoin.
  • MicroStrategy is a business that sold secured debt to fund larger Bitcoin purchases.
  • In an investor letter, Miller explained why his fund bought the MicroStrategy bonds.

Bill Miller, a value investor whose estimated net worth is close to $ 1 billion, sees plenty of value in it Bitcoin—And, by extension, more than $ 2.3 billion is owned by the publicly traded company.

In an investor letter dated January 21, explained Miller Value Funds’ recent purchase of MicroStrategy’s 0.75% conversion bond. It’s all about the Bitcoin.

MicroStrategy, a business intelligence company trading on Nasdaq, holds 70,784 Bitcoin (after it) buy another $ 10 million worth this week), which is currently worth $ 2.3 billion. Having already bet big on BTC throughout 2020, late last year the company led by Michael Saylor sold $ 650 million in debt securities to buy more.

Miller’s company purchased the convertible security, which pays 0.75% in annual interest and can be converted into stock and / or cash, depending on several factors.

“In our assessment there was very little downside and an almost free calling option on Bitcoin,” he wrote. “MicroStrategy now owns more Bitcoin than any operating company, which mimics some shortage value over and above the value of its core business and coins.”

Since Miller’s investment in MicroStrategy went a long way on Bitcoin, the investor set out the case for owning Bitcoin.

“Virtually all Bitcoin long-term holders have earned a higher rate of return in Bitcoin than anything else, and those who understand it see little reason to put their excess marginal liquidity in other assets at this point , ”Miller wrote. “The world is ruled by fat tail events, or seemingly unlikely events that have a major impact on the outside, and all indicators so far indicate that Bitcoin is one.”

Essentially, value investors are looking for and investing in stocks and other assets that they think are trading below their “value”. While that may not sound particularly innovative, the strategy requires investors to ignore day-to-day price fluctuations and instead invest over the long term. That is, they are HODLers, which is why Miller can overlook the volatility of Bitcoin prices and look at it instead as a store of value.

Just as he and MicroStrategy CEO Michael Saylor must ignore the company’s stock price. As MicroStrategy’s market capitalization is around $ 5.4 billion, $ 2.3 billion of which comes from Bitcoin, its share prices tend to go up and down with the BTC price – which tosses $ 5,000 between Wednesday and on Thursday before some rebound today.

Miller is not worried: “Not owning any Bitcoin has been a huge mistake, and we expect that to continue to be the case.”