Michael Saylor, the billionaire founder and executive chairman of Strategy (Nasdaq: MSTR), has turned the former enterprise software company into the world’s largest corporate Bitcoin treasur
Michael Saylor, the billionaire founder and executive chairman of Strategy (Nasdaq: MSTR), has turned the former enterprise software company into the world’s largest corporate Bitcoin treasury.
Strategy’s model involves raising money through common stock, debt and preferred shares, then using much of that capital to acquire Bitcoin (BTC). The company aims to increase the amount of Bitcoin backing each share over time, giving investors amplified exposure to the cryptocurrency.
After exhausting more conventional financing options, however, Saylor faced a new challenge. He needed to find a way for Strategy to attract yield-focused investors while continuing to raise capital for its Bitcoin strategy.
Saylor said he used OpenAI’s ChatGPT to help design a new type of Bitcoin-linked preferred stock during an episode of The Diary of a CEOpublished on Aug. 6.
Related: Inflation-hit Americans earn up to $150 a month in crypto
Saylor asked ChatGPT to help design a security that sat between common stock and traditional debt after Strategy had exhausted much of its capacity to issue shares and convertible bonds.
The AI helped structure STRK, a Bitcoin-backed convertible preferred stock, and later worked through how Strategy could create a short-duration instrument designed to trade near its $100 par value.
ChatGPT’s proposed solution was to let Strategy adjust the preferred stock’s dividend rate each month.
Raising or lowering the yield could help keep the market price close to $100, giving investors a money market-like product that paid income without the same price sensitivity as longer-duration debt.
Saylor said the AI also suggested ways to address objections from bankers and lawyers who had never seen a variable-dividend preferred stock structured that way.
Strategy subsequently raised about $15 billion through its preferred-stock products, leading Saylor to say ChatGPT had “made” him $15 billion.
MicroStrategy CEO Michael Saylor speaks at the Bitcoin 2021 Convention.Source: Getty Images
The amount represents capital raised by Strategy, not personal profit earned by Saylor.
He added that people seeking major opportunities should use AI to identify problems and create products that did not previously exist, rather than trying to outperform automated systems at routine work.
“What you want to do is learn how to ask the AI to do something that’s never been done before.”
The financing breakthrough has not insulated Strategy from Bitcoin’s downturn.
On Aug. 3, the company disclosed that it sold 1,638 BTC for about $104.7 million, at an average price of $63,957. The sale followed earlier Bitcoin disposals intended to strengthen its U.S. dollar reserve and help cover preferred-stock dividends and other obligations.
Strategy held 842,138 BTC as of Aug. 6, acquired for an average of about $75,419 per coin. With Bitcoin trading below that level, the position carried a multibillion-dollar unrealized loss.
The company’s second-quarter results, released July 31, included an $8.32 billion unrealized loss tied to falling Bitcoin prices and a diluted loss of $24.45 per share.
Strategy shares traded at $96.54 at the time of writing, down 1.86% on the day and 37.54% year to date.
Bitcoin traded at $64,617, nearly unchanged over the previous 24 hours.
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