Microsoft’s board of directors has an intriguing item on the agenda for its upcoming annual shareholder meeting; it’s the assessment of Bitcoin investment—a notion signaling the growing interest of corporations and institutional investors in the leading cryptocurrency.
The tech giant’s proposal, which will be voted on at the shareholder meeting on Dec. 10, came to light in a Oct. 24 Securities and Exchange Commission (SEC) filing. However, Microsoft’s board has recommended shareholders to vote against it.
Microsoft’ current financial holdings stand at $76 billion in cash and equivalents. If a mere 10% of this were to be allocated to Bitcoin, it would result in a whopping $7.6 billion investment. Given the average price of $73,000 per Bitcoin, this could potentially acquire Microsoft around 104,109 BTC. This is substantially higher than Tesla’s holdings of 9,720 BTC, though trailing behind MicroStrategy’s aggressive holdings of 252,220 BTC.
Several factors could impact this potential move. The limited Bitcoin supply is one, with over 80% of all BTC remaining inert for over six months, and an alarmingly low supply of BTC on exchanges. Consequently, if Microsoft investors opt for acquiring Bitcoin on this scale, it could trigger a supply shock. The outcome is contingent on the December shareholder vote.
Shareholder voting within U.S. public companies like Microsoft serve a pivotal role in making significant decisions. While votes on special proposals are generally non-binding, they provide an insight into shareholder sentiment and can sway the company to act if notable support is obtained. However, wary of regulatory uncertainty and volatility, Microsoft’s board has advised against the Bitcoin proposal.
Regardless, the burgeoning demand for Bitcoin amongst institutional investors is undeniable. Microsoft board member and LinkedIn founder, Reid Hoffman, has been explicitly positive about Bitcoin in a recent interview, referring to it as a future-shaper of financial systems.
Microsoft’s approach—if they choose to invest in Bitcoin, includes direct purchase or buying shares of a Bitcoin spot ETF, which offers indirect exposure with enhanced liquidity and regulatory lucidity. It can also improve capital efficiency by mitigating custody risks of holding actual assets.
Alternatively, Microsoft could employ leverage, such as call options, to judiciously amplify market exposure without massive upfront capital, facilitating price speculation and augmented returns. Yet, this would entail more risk due to leveraging.
Even though it might be a while before Microsoft invests in Bitcoin, the ongoing shareholder pressure emphasizes Bitcoin’s attractiveness and could motivate other businesses to consider similar ventures.