Michael Saylor, executive chairman of MicroStrategy, has lost majority voting control of the company after recent share issuances.
The shift occurred as Class A shares now outnumber Class B shares in voting power, reducing Saylor’s influence.
This development follows the company’s aggressive fundraising and bitcoin acquisition strategy, significantly altering its corporate governance.
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New Share Issuances Dilute Michael Saylor’s Influence
The sub-30 % of equity Michael Saylor owned shouldn’t have given him the right to vote in control of his favorite company, but the dual share class structure permitted him to maintain control.
His dominance was ensured thanks to 10 times the voting power on Class B shares compared to Class A’s. However, such new Class A issuances have diminished the Class B influence, leaving Saylor with less than 50 percent voting control.
As such, this new change disqualifies MicroStrategy from being categorized as a ‘controlled company’ as defined by NASDAQ rules, which now require new governance.
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The company is required to add independent boards, independent compensation, and nominating committees.
Under these updated rules, Saylor’s role in decision-making, including on bitcoin acquisitions, will be scrutinized more.
Earlier this month, Carl J. Rickertsen, who chairs the MicroStrategy nominating committee, announced he had appointed a governance reform committee.
Upcoming filings with the SEC will disclose details about this committee’s scope and authority. These developments point to a broader shift in corporate governance at the software-turned-bitcoin firm.
MicroStrategy Raises $2.6 Billion for Bitcoin Push
MicroStrategy has invested billions in debt and shares to grow its Bitcoin holdings. At the end of October, the company announced it was taking on $42 billion in debt on top of bitcoin.
Ultimately, because investors are clamoring for more, it raised another round to $2.6 billion today, up from its original $1.75 billion as of yesterday.
The new debt round has a 0% coupon, meaning investors will only make money if MicroStrategy’s stock price rises.
The structure serves well by aligning investor interest with the company’s aggressive strategy, which depends on bitcoin price appreciation.
This approach, however, has proved controversial, yet the company’s valuation has grown to $111 billion, as bitcoin positions are worth 3.55 times the company’s revenue.
At $31 billion worth of Bitcoin, MicroStrategy is listed as one of the world’s largest corporate owners.
The company’s valuation reflects faith in its bitcoin-centric model, although it’s not without risks to market volatility.
But Saylor’s influence declined, and this strategy, as of now, faces new governance challenges.
New Governance Brings Transparency to MicroStrategy
This new voting power introduced by Michael Saylor also brings new checks and balances to MicroStrategy’s operations and decisions.
Nonetheless, NASDAQ rules governing the reforms will mean higher transparency in strategic choices and executive compensation.
The presence of independent directors may also influence aggressive bitcoin acquisition policies going forward.
These changes could be a move toward stability and corporate accountability. MicroStrategy’s signaling of alignment with market governance standards comes with establishing a new nominating committee.
Saylor’s loss of control could slow the company’s bolder investment decisions, which have fueled its rocket rise.
While Saylor, executive chairman, still has a huge role, he can’t make the company go as he once did the way he wanted. This could impact the firm’s investor confidence in implementing its bitcoin strategy.
