Before Tesla's bitcoin play, this company bought first and may have inspired Elon Musk

Published Tue, Feb 9 20218:41 AM ESTUpdated Tue, Feb 9 202110:11 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

MicroStrategy 's stock is up more than 700% since August, when the Virginia-based enterprise software company became an early adopter of buying bitcoin for its corporate treasury. Chairman and CEO Michael Saylor is an outspoken evangelist for bitcoin and encouraged other companies to follow MicroStrategy's lead, including Tesla CEO Elon Musk in a Twitter conversation. On Monday, a little more than a month since Saylor tweeted at Musk, Tesla revealed in a regulatory filing it had bought $1.5 billion worth of bitcoin and plans to accept the digital coin as payment in the future. The price of bitcoin, along with MicroStrategy's shares, soared following the news. Saylor and Musk Saylor and Musk had a brief discussion on Twitter in December after the Tesla chief executive suggested in a post that he found bitcoin tantalizing. "If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to #BTC," Saylor wrote to Musk on Dec. 20. "Other firms on the S & P 500 would follow your lead & in time it would grow to become a $1 trillion favor." Musk responded by asking whether "such large transactions even possible." Saylor responded to Musk by saying: "Yes. I have purchased over $1.3 billion in #BTC in past months & would be happy to share my playbook with you offline - from one rocket scientist to another." However, Saylor has not confirmed whether he spoke privately with Musk. "I'm constrained in what I can say," Saylor told CNBC's "Power Lunch" on Monday." But you know what we said on Twitter and you know what I've been saying all along, which is it's a great idea" for companies to convert cash holdings into bitcoin. Saylor also contended that companies that keep their money in cash will see a stable depreciation in its value over the long run whereas bitcoin — despite its volatility — will increase in value. "Companies that are converting their dollars into bitcoin are taking a nonperforming asset and they're turning it into the best-performing asset," Saylor told CNBC. Tesla as a tipping point? MicroStrategy held a digital event last week around corporate strategy for bitcoin , Saylor said, noting "more than 7,000 enterprises" attended. "With Tesla's move, I think they de-risked this for a corporate treasury," Saylor said. "I think you're going to see more CFOs, more treasurers, look very hard at this and make decisions." But Chester Spatt , a finance professor at Carnegie Mellon University's Tepper School of Business, said he would be "more cautious" about using cash on hand to buy bitcoin if he were running a company. "You could argue, 'Well, it's helping them diversify.' Perhaps, but alternatively, maybe it's just adding to their risk," he said Monday in a phone interview. Spatt, a former chief economist at the Securities and Exchange Commission, pointed to bitcoin's track record of volatility, as well as "practical impediments" to doing transactions with the digital coin. However, Spatt said Musk is definitely considered a forward-looking "thought leader." For that reason, Tesla's bitcoin move and its plans for allowing transactions in the digital currency could have an impact across corporate America. "Could it spur more companies? Yes," he said. "Do I think it's going to be a tipping point in terms of lots of companies switching? Probably not." MicroStrategy's stock Shares of MicroStrategy rose nearly 30% Monday after Tesla's bitcoin buy became public, breaching the $1,000 level for the first time since March 27, 2000, according to FactSet. MicroStrategy's all-time high was reached on March 10, 2000, at $3,330 per share. As MicroStrategy has turned bitcoin into its primary treasury reserve asset, some investors have flocked to its stock as a way to gain exposure to the digital coin. MicroStrategy announced on Aug. 11 it purchased 21,454 bitcoins , with an overall price tag of $250 million including fees and expenses. When the company reported fourth-quarter earnings on Jan. 28, it said its digital asset holdings had grown to include 70,784 bitcoins . Its bitcoin holdings now sit at roughly 71,079, according to a Feb. 2 regulatory filing . MicroStrategy's bitcoin holdings are worth more than $3 billion based on the digital coin's price Tuesday, the most of any publicly traded company, according to the website bitcointreasuries.org . Shares of MicroStrategy closed at roughly $124 on Aug. 10. The next morning, MicroStrategy revealed its first bitcoin buy. Based on Monday's close of $1,041, the stock was up nearly 740% over that period. It was up another 17.4% on Tuesday. Bitcoin was priced around $11,000 per coin in early August and rallied massively throughout the fall. It traded above $45,000 Tuesday morning, having rallied to new highs on the backs of Tesla's announcement. An analyst's take Despite the massive gains in MicroStrategy's stock, not everyone is buying into it. Citi analyst Tyler Radke said in a note last month that MicroStrategy's stock appeared overvalued even when considering the possibility it "continues to trade 'with' Bitcoin." Radke maintained a sell rating and classified the stock as "high risk." However, he raised his price target on the stock to $325 from $250 per share, citing positive subscription trends in its core business and higher profitability. "We believe the BTC premium could erode over time thru increased BTC volatility / underperformance, or if alternative Bitcoin investment vehicles become available," Radke wrote. MicroStrategy completed a $650 million convertible note offering in December and used the net proceeds from it to further invest in bitcoin. Radke also highlighted that move in his Jan. 29 note to clients, calling it "aggressive" and a potential "deal-breaker for some software investors." Watch the full interview with MicroStrategy CEO Michael Saylor above.

An illustration of bitcoin on Euro banknotes.

Nicolas Economou | NurPhoto via Getty Images

MicroStrategy's stock is up more than 700% since August, when the Virginia-based enterprise software company became an early adopter of buying bitcoin for its corporate treasury.

Chairman and CEO Michael Saylor is an outspoken evangelist for bitcoin and encouraged other companies to follow MicroStrategy's lead, including Tesla CEO Elon Musk in a Twitter conversation.

On Monday, a little more than a month since Saylor tweeted at Musk, Tesla revealed in a regulatory filing it had bought $1.5 billion worth of bitcoin and plans to accept the digital coin as payment in the future. The price of bitcoin, along with MicroStrategy's shares, soared following the news.