In a turbulent market, you can use cash as an offense or defense. MicroStrategy Inc., which recently holds nearly one billion dollars in cash, believes that it can do it, and it can do it.
The company could have gotten rid of excess cash by paying huge dividends or buying back large amounts of stock. Instead, MicroStrategy bet half of its total assets on Bitcoin. So is this a listed company or a hedge fund?
This attempt at digital currency refreshes the old investment paradox. As the great financial analyst Benjamin Graham (Benjamin Graham) has long observed, the stronger the company’s ability to produce goods and services, the more likely it is that the accumulated cash will exceed the cash needed to maintain the business. When investors can better use the surplus cash elsewhere, why should they lock up and idle the surplus cash?
When the remaining cash yield reaches 5% or above, most shareholders and company executives will not bother them too much. Now that yields are close to zero, investors need to be aware: When cash is wasted, the pressure to take unprecedented risks may increase.
MicroStrategy, headquartered in Tysons Corner, Virginia, sells technologies that enable companies to analyze internal and external data. Because of the cheap software and services it produces and provides, the company continues to accumulate cash.