“Legacy” Tech Giants Are Considering Diversifying Their Portfolios With Crypto
10/31/2024 23:45
Microsoft’s December 10th meeting will ask shareholders to vote on whether to invest in BTC, or to not invest in BTC - that is the question. Institutional investors watch on patiently to see whether the shareholder vote at the multi-trillion dollar tech giant pivot from the current investment plan and instead acquire Bitcoin directly.
As Q4 continues and the end of the year draws closer, a slew of annual shareholder meetings are set to take place at some of the world’s biggest tech companies. Among them, Microsoft, whose December 10th meeting will ask shareholders to vote on a crucial decision. To invest in BTC, or to not invest in BTC - that is the question.
Interestingly, Microsoft’s board of directors have urged shareholders to vote against the proposal, arguing that their Global Treasury and Investment Services team “already carefully considers the topic”. They’ve yet to make a BTC purchase. The “Assessment of Investing in Bitcoin” proposal argues that Microsoft’s current investments in corporate bonds barely outpace inflation, while Bitcoin is described as an “excellent, if not the best, hedge against inflation.”
The top shareholders at Microsoft may find themselves torn. Vanguard opted against Bitcoin ETFs and has stayed away from the digital asset class, while BlackRock, on the other hand, just set the record for Bitcoin ETF single-day inflows, at $875m. With these two shareholders differing in opinion, or at least in action, other major shareholders, like State Street, may turn the tide in the upcoming vote. Currently expanding its crypto custody and tokenization services, State Street appears more likely to back the proposal, though this is speculative.
Should shareholders vote in favor of the proposition and push Microsoft to diversify its assets to increase shareholder value via Bitcoin, it would certainly be a landmark moment. If the world’s third-largest company begins putting BTC on their portfolio, that hundreds, if not thousands of other institutional investors may be encouraged to follow suit, starting a rush to stock up on the digital asset, and perhaps sparking another cryptocurrency bull run.
Looking back, MicroStrategy stands out as the first major tech company that really backed the notion of putting BTC in your corporate portfolio. Having made that move early and continuing to bolster their reserves, Michael Saylor, the founder and former CEO, has put the company in a healthy position. MicroStrategy currently holds around 2.7% of the total Bitcoin supply, and they’ve used that to generate serious profits, this week reporting a year-on-year yield of 17.8% on their $18bn BTC warchest. Phone Le, the current MicroStrategy CEO, commented, “As a Bitcoin Treasury Company, we plan to use the additional capital to buy more Bitcoin as a treasury reserve asset in a manner that will allow us to achieve higher BTC Yield.”
Even if Microsoft’s shareholders reject the vote and overlook the results gained by MicroStrategy and other major cryptocurrency-holding corporate tech companies (e.g. Galaxy, Marathon, Tesla), they will still be exposed to blockchain investments in another way. Microsoft has been quietly investing in Web3 since 2019, when M12, its venture capital fund, invested in Inworld (Series A). Since then, it has added 9 more Web3-related companies to the portfolio. In September, M12 led a notable and successful $20 million funding round for the latest of their Web3 investments, decentralized data company Space and Time.
Discussing Microsoft’s significant upcoming shareholder meeting, Nate Holiday, Space and Time’s CEO and Co-Founder, commented, “Shareholders are looking to protect the value that has been created over decades of excellent business execution during an era of inflation. Crypto as an asset class is growing at an unprecedented rate compared to previous technology adoption curves like the internet. The recommendation was that Microsoft already operates a robust treasury and investment team for delivering shareholder value”. He added “Shareholders seem to be wanting to add additional web3 investments now like Bitcoin to bolster their exposure to the emerging technology class.”
As for whether other tech giants will follow suit and diversify their portfolio with BTC and other cryptocurrencies, Holiday explained, “Yes, we will continue to see other adoption of investments into Web3 technologies to protect and grow shareholder value. You are seeing more companies, institutions and nation states express interest in Bitcoin.” He also suggested that “These forward thinking companies understand the adoption curve of Web3 tech and are positioning themselves for their future.”
A final note on Microsoft’s upcoming shareholder meeting. One comment in the proposal notes suggests that while the company should reconsider its position on Bitcoin investments, it should not do so in a way that exposes shareholders to too much risk, by way of over-investing. The suggestion is that Microsoft “evaluate the benefits of holding some, even just 1% of its assets in Bitcoin.”
Institutional investors watch on patiently to see whether the shareholder vote at the multi-trillion dollar tech giant pivot from the current investment plan and instead acquire Bitcoin directly.