Bitcoin Is Slumping, but Michael Saylor Says Strategy Can Create $10 Billion to $30 Billion in "Digital Credit"

Michael Saylor, CEO of MicroStrategy, discussed the company's financial strategy during its third-quarter earnings call. Saylor proposed that MicroStrategy could create $10 billion to $30 billion worth of "digital credit" without relying on Bitcoin prices to rise or issuing additional common stock. Digital credit refers to perpetual preferred stock, which is backed by MicroStrategy's 850,364 Bitcoin holdings worth around $63.3 billion at current prices.

This Bitcoin stockpile represents roughly 4% of the total Bitcoin supply. Saylor believes that having this sizable Bitcoin reserve allows the company to issue digital credit regardless of Bitcoin's market fluctuations. The $30 billion figure represents the theoretical maximum capacity for digital credit issuance, rather than an announced fundraising target.

MicroStrategy currently has four classes of preferred stock totaling approximately $13 billion, with the Variable Rate Series A preferred stock holding the largest market value at $8.0 billion. The company uses this preferred stock to raise funds for Bitcoin purchases and can buy back the shares to maintain their par values. However, the potential benefits of digital credit depend on three key factors: how much MicroStrategy actually sells, the extent of its common stock buyback, and whether it continues to acquire Bitcoin as planned. These aspects will be revealed in upcoming filings.