That’s One Way to Get Rich

Christian DeHaemer

Posted March 5, 2024

That’s One Way to Get Rich

I learned to trade options on the CBOE back in the day when people still used hand signals.  During a coffee break, a crusty old instructor with big shoulders, a thick mustache, and a Polish last name told me the story of Robby the Rocket.

Legend had it that Robby was a go-for-broke type of guy.  He was all in, all the time.   After convincing people to give him a stake, he would leverage up with some short-term out-of-the-money options.  Robby went broke again and again, blowing up accounts and burning through clients, until one day he hit it big – made a fortune and was never seen from again.

It’s a great strategy – so long as you have plenty of other people’s money.

Go Big or Go Home

That kind of big risk-taking reminds me of MicroStrategy and its owner Michael J. Saylor.  Saylor got his start at DuPont (DD) back in the early 1980s after he graduated from MIT.  Saylor built a computer modeling system for Dupont that correctly predicted a recession in most of Dupont’s businesses in 1990.

From there, he formed MicroStrategy with one of his MIT Frat brothers.  From their blurb:

“MicroStrategy Inc develops software that enables organizations to analyze internal and external data to make business decisions and to develop mobile applications. Its core product is MicroStrategy 10, which provides interactive dashboards, scorecards, highly formatted reports, ad hoc query, thresholds and alerts, and automated report distribution.”

The company went public in the late 1990s at $12 a share.  Just in time to get all the hype as a cutting-edge tech company during the heyday of the dot-com bubble.  Shares skyrocketed to ~ $3300 – a 2740% gain before crashing back down to reality.  

MicroStrategy shares did very little for the next 20 years, going sideways until 2020.  In the thick of the COVID pandemic, Saylor said he was going to use MicroStrategy money to buy Bitcoin, instead of holding cash.  His first buy was for $250 million Bitcoin or 21,454 of them.

MSTR continued to buy Bitcoin during both the ups and the downs, and even borrowed money to buy more Bitcoin.  At the time he was criticized for turning MSTR into an unregulated bitcoin ETF.  His critics were right.

As of February 5, 2024, MSTR owns 190,000 Bitcoin at a total cost of $5.93 billion, or $31,224 per Bitcoin.  

Revenue for their main business was $124.5 million in the latest quarter, down 6% year over year.  Income was negative.  That revenue is not near enough to support a $22 billion market cap or a forward pe ratio of 769. But those 190,000 Bitcoin…

Today Bitcoin is trading at $68,428 just shy of an all-time high.

Here is a 25-year chart for MicroStrategy Inc. (MSTR):

In August 2022, Saylor resigned as CEO, remaining as executive chairman, to focus more on bitcoin.  And more recently he has been selling shares of MicroStrategy.

All the best,

Christian DeHaemer

Pro Trader Today