Bitcoin Becomes the New Favorite of Listed Companies

Bitcoin has once again become the focus of the financial market. Yesterday, the price of Bitcoin briefly rose to $73,660, nearly touching the historical high of $73,881.3 set on March 14 of 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 also attracted the attention of publicly traded companies. Recently, a large technology company stated in documents submitted to the U.S. Securities and Exchange Commission (SEC) that it will vote on the topic of "assessment of investing in Bitcoin" at its shareholder meeting on December 10. Although the company's board of directors recommends opposing the proposal, the shareholders' attitudes vary.

As a globally renowned company, the mere consideration of investing in Bitcoin carries profound significance. On the other hand, other companies that have already taken action have reaped substantial rewards from the rise in Bitcoin prices, which has also provided an important lesson for other listed companies.

The board opposes the proposal to invest in Bitcoin.

Affected by multiple factors, Bitcoin has once again attracted the attention of investors recently. Although there was a slight decline on October 30, Bitcoin has increased by more than 56% since the beginning of the year, surpassing global major asset classes including large-cap stocks, mid-cap and small-cap stocks, US and European stocks, commodities, government bonds, gold, cash, emerging markets, and real estate investment trusts, demonstrating strong anti-inflation and counter-cyclical characteristics.

The status of "digital gold" has been further consolidated, attracting not only retail investors but also the interest of well-funded publicly traded companies. According to documents released by the U.S. Securities and Exchange Commission on October 24, a large tech company appears to be interested in investing in Bitcoin. The company has included the topic of "evaluation of investment in Bitcoin" in the voting agenda for the next shareholder meeting scheduled for December 10.

This proposal was initiated by a think tank from the company's '2025 Project' advisory committee, suggesting that the company invest at least 1% of its total assets in Bitcoin, arguing that "companies should consider Bitcoin as a hedging tool to protect shareholder value." From the price performance of Bitcoin, this suggestion seems reasonable, and diversification of asset allocation is also justifiable. However, the company's board of directors opposes this.

The board believes that there is no need to vote on this proposal, stating that it has given sufficient consideration to the proposal. The company stated that its global financial and investment services team has conducted a comprehensive evaluation of various investable assets, with the aim of providing funding for the company's ongoing operations. This includes assets expected to provide diversification and inflation protection, as well as assets capable of reducing the risk of significant economic losses due to rising interest rates. In past evaluations, Bitcoin and other cryptocurrencies have been 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. In other words, while crypto assets may be a good option, the company does not completely rule out this option; however, the significant price fluctuations of Bitcoin may impact the balance sheets of publicly listed companies, making it not a robust asset choice.

Although the board is cautious about investing in Bitcoin, the final decision rests with the majority shareholders. According to data, two large asset management companies are currently the largest institutional shareholders of the tech company, holding 8.95% and 7.30% of the shares, respectively.

The attitudes of these two major shareholders towards Bitcoin are completely different. One of them has already made achievements in the crypto field, launching Bitcoin and Ethereum spot ETFs this year, with its Bitcoin ETF's market value exceeding $30 billion, performing the best among the first batch of Bitcoin ETFs. The company's executives have also publicly stated, "Bitcoin itself is an asset class and a substitute for other commodities like gold."

In contrast, the attitude of another major shareholder is less friendly. The company made it clear at the beginning of this year that it does not allow its clients to purchase any spot Bitcoin ETF and stated that there are no plans to offer Bitcoin ETFs or other crypto-related products. "We believe that these products are inconsistent with our focus on asset classes such as stocks, bonds, and cash, which we view as the cornerstone of a balanced long-term investment portfolio."

The positions of the two major shareholders differ, and the thoughts of the minority shareholders also vary, making the final voting result difficult to predict. Currently, the company's shareholders have begun preliminary voting on this proposal. If the proposal is approved, as an industry benchmark, the company will further enhance the market awareness of Bitcoin and may trigger a chain reaction, prompting more listed companies to incorporate Bitcoin into their financial strategies, thereby reinforcing its "digital gold" positioning and accelerating the mainstreaming process of Bitcoin. Even if the proposal fails to pass, the very act of the company considering investing in Bitcoin will have a far-reaching impact on the industry. One of the world's largest listed companies showing interest in Bitcoin is a strong testament to Bitcoin gradually becoming mainstream.

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

In fact, for listed companies, investing in Bitcoin is no longer a new thing. According to data statistics, there are currently 29 listed companies holding Bitcoin, with a total of 360,000 coins, worth over 2.6 billion dollars. Among them, the most representative is a software company.

On August 11, 2020, this software company announced its entry into the Bitcoin space by purchasing 21,454 Bitcoins for $250 million, officially incorporating Bitcoin into the diversified asset portfolio of the listed company. This move caused a significant uproar in the market at the time and marked an important step in the mainstreaming process of Bitcoin.

Since then, every year, regardless of the market fluctuations, the company has adhered to one principle - buy and hold Bitcoin. Starting in 2020, the company has firmly implemented this strategy, and by the third quarter of 2024, it has accumulated 252,220 Bitcoins at an approximate price of $9.9 billion, becoming the publicly listed company with the most Bitcoin holdings in the world. In the recently released financial report, the company stated that it will continue to implement this strategy, planning to raise $21 billion in equity and issue $21 billion in bonds over the next three years, using the additional capital to purchase more Bitcoins as financial reserve assets to achieve higher returns.

It has been proven that in this gamble on Bitcoin, the company has become the biggest winner. The company's average purchase price for each Bitcoin was about $39,266, while the current price of Bitcoin has skyrocketed to around $72,000. In terms of stock performance, the company's shares have soared to $247.31, reaching a 25-year high and successfully entering the $50 billion market cap club. Reports indicate that the company's stock performance over the past two years has outperformed nearly all large U.S. stocks, including some well-known tech companies. The report emphasizes that the company's "unconventional" decision to buy Bitcoin four years ago to hedge against inflation has driven an increase of over 1,700%.

The company's strategy is therefore highly sought after. Some analysts point out that under the current valuation model, the company is highly dependent on Bitcoin, resulting in two valuation models: one is the discounted value brought about by the growth of its own business system; the other is the current value of the Bitcoin commodity itself. As long as there is an expectation of future premiums for Bitcoin, the company can continuously increase its market value by adjusting the ratio of Bitcoin holdings to stock issuance. Imitators have since emerged, for example, a digital securities market has stated that it will follow the company's example and actively expand its Bitcoin reserve in the coming years.

In addition, another well-known company holds a large amount of Bitcoin. The company first purchased $1.5 billion worth of Bitcoin in February 2021, and in the same year, it announced at one point that its products could be purchased using Bitcoin, but this policy was later likely canceled due to severe price fluctuations. As of the third quarter of 2024, the financial report shows that the company holds $763 million worth of Bitcoin, ranking fourth among publicly listed companies in terms of holdings.

It is worth noting that although the company made large transfers in the third quarter, transferring 75.18 million, 76.08 million, and 77.16 million U.S. dollars' worth of Bitcoin to anonymous wallets, there has been no selling activity so far. This means that since reducing its holdings by 75% in the second quarter of 2022, the company has not sold any Bitcoin for two consecutive years, demonstrating its long-term bullish attitude towards Bitcoin. Additionally, another affiliated company of this firm holds approximately 560 million U.S. dollars' worth of Bitcoin, and the two companies currently own a total of about 19,788 Bitcoins, with a total market value of approximately 1.3 billion U.S. dollars.

Conclusion

Overall, while some company boards are currently cautious about investing in Bitcoin, in the long run, as the value of Bitcoin increases and the process of mainstreaming advances, incorporating Bitcoin as part of asset diversification may become the norm for publicly traded companies. However, the current volatility of Bitcoin and compliance issues remain major challenges faced by publicly traded companies.

The positive aspect is that there has been some loosening in compliance in the United States, with changes in accounting standards being a typical example. At the end of last year, the Financial Accounting Standards Board (FASB) in the United States issued new regulations that require the fair value accounting of Bitcoin to be officially adopted for fiscal years beginning after December 15, 2024. Prior to this, holders of listed companies needed to account for Bitcoin as an impairment loss, but could only record its appreciation at cost price, which was undoubtedly a significant obstacle for listed companies eager to showcase impressive financial reports. After the implementation of the new regulations, Bitcoin can be recorded at market fair value, which will resolve this issue.

It can be seen that the position of Bitcoin in the asset allocation of listed companies may be gradually increasing.