For many years, Grayscale Bitcoin Trust (GBTC) was the world’s largest publicly traded bitcoin fund. They charged a 2% annual fee to manage up to $30 billion worth of bitcoin. However, with the recent development of a spot bitcoin ETF charging 1.5%, GBTC is now considered to be the most expensive of its kind.
MicroStrategy’s intricate mix of factors such as debt service, share dilution, stock-based derivatives compensation, and preferred voting rights make it potentially even more expensive than any bitcoin ETF. In addition, MicroStrategy holds a significant amount of bitcoin, with $7.69 billion in BTC, accounting for 98% of the firm’s $7.83 billion market cap. On the surface, it may look like the least expensive bitcoin fund, but its complexities could prove otherwise.
Another factor that makes MSTR particularly expensive is its stock-based compensation. As it issues Restricted Stock Units (RSUs), options, and various convertibles that can lead to dilution of common shareholders over time. This, combined with MicroStrategy’s ongoing debt-servicing interest costs and the controlling voting power of its executive chairman Michael Saylor, makes MSTR one of the most expensive bitcoin fund-like shares listed on US securities exchanges. In the end, buying MSTR may not offer as much value in bitcoin holdings as initially assumed.
Furthermore, Michael Saylor owns 99% of MicroStrategy’s super-voting Class B shares, giving him approximately 67% voting power over the company. This absolute control allows him to prevent a third party from acquiring the company or limit the ability of other stockholders to influence corporate matters.
When considering these factors, it becomes clear that a comprehensive analysis of the costs and share structures of these crypto-related funds is essential for investors looking to enter the space. It is important for investors to be well-informed about the potential expenses and hidden costs associated with different investment options in the crypto industry. Such insights can help investors make more informed decisions and avoid any potential pitfalls in the evolving world of cryptocurrency and NFTs.
