Bitcoin is favored by listed companies

Recently, Bitcoin has once again become the focus of the financial market. On October 30, the price of Bitcoin soared to $73,660, nearly reaching the historical high of $73,881.3 set in March this year. In the current political environment, the market generally predicts that the price of Bitcoin may reach $100,000 by the end of the year.

This trend has attracted the attention of publicly listed companies. Recently, a well-known tech giant stated in a filing submitted to the U.S. Securities and Exchange Commission (SEC) that it will vote on the topic of "assessment of investments in Bitcoin" at the shareholder meeting on December 10. Although the company's board of directors has recommended opposing this proposal, shareholders' views may vary.

Even if we only consider investing in Bitcoin, the actions of this tech giant have far-reaching implications. On the other hand, a certain software company that has long invested in Bitcoin has reaped significant profits in the recent Bitcoin surge, setting an example for other publicly traded companies.

Tech Giants Considering Investment in Bitcoin? Board Holds Opposing View

Affected by recent market changes, Bitcoin has once again attracted the attention of investors. Although there was a slight pullback on October 30, Bitcoin has risen more than 56% since the beginning of the year, outperforming major global asset classes, including large-cap stocks, small and mid-cap stocks, European and American stock markets, commodities, government bonds, gold, cash, emerging markets, and real estate investment trusts, demonstrating strong anti-inflation and anti-cyclical characteristics.

The performance of this "digital gold" has not only attracted retail investors but has also caught the interest of well-funded publicly traded companies. According to documents released by the U.S. Securities and Exchange Commission on October 24, a tech giant appears to be interested in investing in Bitcoin. The company has included the topic of "assessment of investment in Bitcoin" in the voting agenda for the next shareholders' meeting on December 10.

This proposal was initiated by a conservative think tank of the company's "2025 Project" advisory committee, suggesting that the company invest at least 1% of its total assets in Bitcoin, on the grounds that "companies should consider Bitcoin as a hedging tool to protect shareholder value." Judging from Bitcoin's price performance, this suggestion seems to have its rationale, and asset allocation diversification is also a widely accepted investment strategy. However, the company's board has stated that shareholders are advised to vote against this proposal.

The board believes that this vote is unnecessary, stating that it has fully considered the proposal. The company stated that its global financial and investment services team has conducted a comprehensive assessment of various investable assets, with the aim of providing funding for the company's ongoing operations, including those assets that can provide diversification and inflation protection, as well as those assets that can reduce the risk of significant economic losses due to rising interest rates. In previous assessments, Bitcoin and other cryptocurrencies were considered, and the company will continue to monitor trends and developments related to cryptocurrencies to inform future decisions.

The company emphasizes that volatility is a key factor to consider when evaluating cryptocurrency investments. Although crypto assets may be a potentially viable investment option, the company does not completely rule out this possibility. However, the significant price fluctuations of Bitcoin may impact the balance sheets of publicly listed companies, and thus it is not considered a robust asset choice.

Although the board of directors maintains a cautious attitude towards Bitcoin investments, the final decision rests with the majority shareholders. According to publicly available data, two large asset management companies are currently the largest institutional shareholders of the tech giant, holding 8.95% and 7.30% of the shares, respectively.

The two major shareholders have differing attitudes towards cryptocurrency. One of them has already ventured into the crypto space, launching Bitcoin and Ethereum spot ETFs this year. As of October 30, the market capitalization of its Bitcoin ETF has surpassed $30 billion, performing the best among the first batch of Bitcoin ETFs. The company's executives have also publicly stated that "Bitcoin itself is an asset class, a substitute for other commodities such as gold."

In contrast, the attitude of another major shareholder is relatively conservative. The company made it clear at the beginning of the year that it does not allow its clients to purchase any spot Bitcoin ETFs and stated that it has no plans to offer Bitcoin ETFs or other crypto-related products. The company believes that these products are inconsistent with its strategy, which focuses on traditional asset classes such as stocks, bonds, and cash, and views these traditional asset classes as the cornerstone of a balanced long-term investment portfolio.

The two major shareholders have differing positions, and the thoughts of minority shareholders may also vary, making the final voting outcome difficult to predict. Currently, shareholders of this tech giant have begun to conduct preliminary voting on the proposal. If the proposal is approved, as an industry benchmark, the company's decision will further enhance the market awareness of Bitcoin, potentially triggering a chain reaction that encourages more publicly listed companies to incorporate Bitcoin into their financial strategies, thereby reinforcing its status as "digital gold" and accelerating the mainstreaming process of Bitcoin. Even if the proposal is ultimately not approved, merely considering the investment in Bitcoin is not to be underestimated in terms of its impact on the industry. The interest of one of the world's largest publicly traded companies in Bitcoin is itself a strong testament to Bitcoin's gradual entry into the mainstream.

It is not new for listed companies to invest in Bitcoin.

In fact, it is no longer a novelty for publicly traded companies to invest in Bitcoin. According to data platform statistics, there are currently 29 publicly traded companies holding Bitcoin, with a total of 360,000 coins, worth over 2.6 billion USD. Among them, the most representative is a software company.

The software company announced its entry into the Bitcoin sector on August 11, 2020, purchasing 21,454 Bitcoins for $250 million, officially incorporating Bitcoin into its diversified asset portfolio. This move garnered widespread attention in the market at the time and was seen as a significant milestone for Bitcoin's move toward the mainstream.

Since then, regardless of market fluctuations, the company has consistently adhered to a buy and hold strategy for Bitcoin. As of the third quarter of 2024, the company has cumulatively invested approximately 9.9 billion USD to purchase 252,220 Bitcoins, becoming the publicly listed company with the largest Bitcoin holdings globally. In the latest financial report released, the company stated it will continue to execute this strategy, planning to raise 21 billion USD in equity and issue 21 billion USD in bonds over the next three years to purchase more Bitcoin as financial reserve assets to achieve higher returns.

It has been proven that the company's bet on Bitcoin has achieved great success. The company’s average cost for each Bitcoin purchased is about $39,266, while the current Bitcoin price is close to $72,000. In terms of stock performance, the company's share price has soared to a 25-year high of $247.31, successfully entering the $50 billion market cap club. Reports indicate that the company's stock performance over the past two years has nearly surpassed all large U.S. stocks, including a well-known chip company, driven by its "unconventional" decision to purchase Bitcoin four years ago to hedge against inflation, resulting in an increase of over 1,700%.

The strategy of the software company has thus attracted widespread attention. An overseas analyst pointed out that under the current valuation model, the company is highly dependent on Bitcoin, giving it two valuation models: one is the discounted value brought by its own business growth; the other is the current value of Bitcoin itself. As long as there is an expected future premium for Bitcoin, the company can continuously increase its market value by adjusting the ratio of Bitcoin holdings to stock issuance. This successful case has led to imitation by other companies, such as a digital securities market that stated it would follow the company's strategy and actively expand its Bitcoin reserves in the coming years.

In addition, another well-known electric vehicle manufacturer also holds a large amount of Bitcoin. The company purchased $1.5 billion worth of Bitcoin as early as February 2021, and at one point announced that it would accept Bitcoin for vehicle purchases, but later may have canceled this policy due to excessive price volatility. As of the third quarter of 2024, the company's financial report shows it holds $763 million worth of Bitcoin, ranking fourth in the holdings of publicly listed companies, behind the aforementioned software company and two specialized cryptocurrency companies.

It is worth noting that although the electric vehicle manufacturer made several large Bitcoin transfers in the third quarter, totaling $75.18 million, $76.08 million, and $77.16 million to anonymous wallets, there has been no selling activity to date. This means that since reducing its Bitcoin holdings by 75% in the second quarter of 2022, the company has not sold any Bitcoin for two consecutive years, demonstrating its CEO's long-term bullish attitude towards Bitcoin. In addition, another aerospace company owned by the CEO also holds approximately $560 million in Bitcoin, with the two companies combined owning about 19,788 Bitcoins, totaling a market value of approximately $1.3 billion.

Conclusion

Returning to the topic of this discussion, overall, considering the current attitude of the board, the tech giant's vote on Bitcoin may be more symbolic than practical. However, in the long run, as the value of Bitcoin increases and the process of mainstreaming progresses, incorporating Bitcoin as part of asset allocation diversification may become the norm for publicly traded companies. But currently, the high volatility of Bitcoin and compliance issues remain the main challenges faced by public companies.

It is worth noting that in terms of compliance, the United States has begun to relax restrictions, and changes in accounting standards are a typical example. At the end of last year, the Financial Accounting Standards Board (FASB) in the United States issued new regulations, stipulating that the fair value accounting of Bitcoin will be officially adopted for fiscal years beginning after December 15, 2024. Before this, publicly traded companies holding Bitcoin were required to recognize impairment losses, but the appreciation could only be recorded at cost, which posed a significant obstacle for listed companies wishing to present impressive financial reports. After the implementation of the new regulations, Bitcoin can be recorded at market fair value, resolving this issue.

It can be seen that the application of Bitcoin in listed companies may be in its infancy, and future development is worth looking forward to.