January 19, 2025

What a Historic Acquisition Can Teach Us About MicroStrategy’s 21/21 Plan

“What we’re really buying is time,” read an email sent by a very famous CEO to his CFO in February of 2012.

“These businesses are nascent but the networks are established, the brands are already meaningful, and if they grow to a large scale the could be very disruptive to us,

The CFO pushed back, “All the research I have seen is that most deals fail to create the value expected by the acquirer.” He went on to list four potential reasons to buy a company: (1) neutralizing a competitor, (2) acquiring talent, (3) integrating products to improve our current service, and (4) “other.”

“It’s a combination of (1) and (3),” replied the CEO.

This initial email exchange would pave the way for what is widely regarded as one of the most successful acquisitions in history.

Any idea what acquisition those emails were referring to?

If you haven’t already guessed it, these emails were revealed in the summer of 2020 at a House antitrust subcommittee’s hearing on antitrust issues in tech. Mark Zuckerberg was being questioned about this email exchange with Facebook’s then CFO David Ebersman about the potential of acquiring Instagram.

Let’s Make a Deal

But Zuckerberg wasn’t the only one that saw the potential value (and threat) of Instagram’s platform. Twitter offered to buy Instagram for $525 million in cash and stock in March of 2012. That was just three weeks before Mark Zuckerberg closed a deal to buy Instagram for $1 billion in cash and stock (at the time) on April 9th.

At the time of the deal, Instagram was a relatively small company with only 13 employees on the team. With 30 million active users and no revenue model, many analysts questioned the $1 billion price tag.

The deal was structured such that Facebook would give Instagram $300 million in cash as well as approximately 23 million shares of Facebook stock. Due to fluctuations in Facebook’s stock price after its IPO in May 2012, the final valuation at the time of the deal closing (September of 2012) was actually closer to $715 million.

By 2018, Instagram’s valuation had skyrocketed to over $100 billion.

By 2021, Instagram’s annual revenue of $32.4 billion accounted for almost 30% of Facebook’s total revenue.

And these numbers continue to grow, as Instagram is expected to generate 50% of Meta’s U.S. ad sales in 2025.

Meta – which Facebook rebranded to in 2022 – now has a market cap of $1.56T (as of 1/7/25). While Instagram’s valuation is not public and figures are speculative due to the integrated nature of Meta’s operations, Instagram’s significant revenue contribution easily puts its valuation into the hundreds of billions.

The shareholder value Meta created from this acquisition continues to grow YoY. In addition to the astronomical ROI, Instagram provided significant strategic value to Facebook that can’t be quantified monetarily. Strategic value included:

  1. Neutralization of a potential competitor
  2. Expansion of Facebook’s mobile presence at a crucial time
  3. Diversification of revenue streams
  4. Attraction of a younger demographic to the Facebook ecosystem

Down, but Not Out: MicroStrategy’s Fall from Grace

MicroStrategy was founded in 1989 by Michael Saylor, Sanju Bansal, and Thomas Spahr as a software company that took off during the DotCom boom. It reached a staggering $50 billion valuation in 2000 before plummeting over 98% during the tech bubble (the decline was also fueled by an accounting issue within the company’s financials).

From there, $MSTR’s stock price spent 20 years in purgatory. On March 18, 2020, MicroStrategy’s market cap was only $931 million, per YCharts.

microstrategy marketcap chart

Around this time, MicroStrategy was generating $500M per year in revenue, $75M in net income, and had $500M in cash on their balance sheet—but they just weren’t growing.

Meanwhile, the government was printing money—a lot of money—during COVID. A $16T money supply quickly shot up to $22T, which would surely dilute dollars through inflation in the coming years. Saylor – who served as the company’s CEO until 2022 (when he became executive chairman) – began researching various options for the company’s excess cash.

As Saylor detailed on the Iced Coffee Hour podcast: “We had $500m of actual assets and then the government was increasing the currency supply by 20% a year. At a 15% [increase in money supply] a year, [MicroStrategy was] losing $75 million of capital value of wealth every year for the $75 million [we’re] winning.

Something had to change.

“There is No Second Best”

Most public companies rely on treasuries as a corporate cash management tool. But with interest rates near zero and inflation on the horizon, Michael Saylor decided he needed to turn to bitcoin to help preserve the purchasing power of MicroStrategy’s treasury assets.

Bitcoin’s supply is limited to 21,000,000 bitcoin. Only a certain amount of those 21,000,000 bitcoin are created through bitcoin’s mining process and that amount becomes exponentially more scarce over time. Unlike traditional fiat currencies, which can be printed out of thin air by central banks like the Federal Reserve, the issuance of bitcoin is restricted by time.

As of 1/14/2025, there are over 19.8 million bitcoin in circulation. Only about 450 bitcoin are created per day, and every four years that new issuance amount gets cut in half. Saylor saw bitcoin as an opportunity to shift MicroStrategy’s capital from an asset (dollars) that gets diluted at an exponential rate to an asset (bitcoin) that gets exponentially more scarce.

On August 11, 2020, MicroStrategy made its first bitcoin purchase, acquiring 21,454 bitcoin at an average price of $11,654 for a total investment of approximately $250 million.

They went on to purchase a total of 70,470 bitcoin in 2020 at an average cost of approximately $15,964 per coin.

They purchased 90,531 bitcoin in 2021 at an average cost of approximately $30,200 per coin.

They purchased 2,395 bitcoin in 2022 at an average cost of approximately $17,871 per coin.

They purchased 19,255 bitcoin in 2023 at an average cost of approximately $28,609 per coin.

But 2024 proved to be a different game altogether…

MicroStrategy’s “21/21 Plan”

As we touched on in a recent article, Saylor’s 21/21 plan is well underway. On October 30, 2024, MicroStrategy announced a plan to buy $42 billion worth of bitcoin by 2027. Saylor called the initiative the “21/21 Plan,” which involves raising $21 billion through equity via an at-the-market (ATM offering), and another $21 billion via debt. This strategy builds on MicroStrategy’s history of using debt instruments – like convertible notes and senior secured bonds – to fund Bitcoin acquisitions.

Before the 21/21 Plan went into effect, MicroStrategy purchased 63,070 bitcoin in 2024 at an average cost of approximately $63,622.96 per coin.

After the 21/21 Plan went into effect, MicroStrategy purchased a whopping 188,918 bitcoin in 2024 at an average cost of approximately $91,780.56 per coin.

Two weeks into 2025 MicroStrategy has already purchased 3,600 bitcoin at an average cost of approximately $95,555.56 per coin.

Parallels between Facebook’s Acquisition of Instagram & MicroStrategy’s 21/21 Plan

How can one of the most successful acquisitions in history help us understand Michael Saylor’s bitcoin acquisition plan at MicroStrategy? There may be more parallels than you think.

Visionary Leadership

Zuckerberg recognized Instagram’s potential at a relatively early stage. Saylor also identified bitcoin relatively early as a corporate treasury asset and store of value (MicroStrategy first purchased bitcoin in August of 2020).

Transformative Impact

Instagram fundamentally transformed Facebook’s offerings and user base. We believe Bitcoin has transformed MicroStrategy from a software company into the world’s first and largest Bitcoin Treasury Company.

Financial Performance

We’ve already touched on Instagram’s valuation at $200 billion plus. MicroStrategy’s 2020 bitcoin purchases have already almost 10X’d (and Saylor believes it’s very very early – more on that later).

MicroStrategy is Generating Shareholder Value

MicroStrategy has invested almost $28B in bitcoin and their current holdings are already worth just shy of $44B.

Since the announcement of the 21/21 Plan, MicroStrategy has spent $18.3 billion of the $42 billion it allocated for bitcoin investment. Let’s assume an average cost per coin of is $150,000 for the remaining $23.7 billion invested as it’s put to work between now and 2027 (the year shared when the 21/21 plan was announced). That would result in the acquisition of another 158,000 bitcoin.

MicroStrategy’s current holdings of 450,000 bitcoin plus that 158,000 would bring their total holdings to 608,000 bitcoin on a total investment just shy of $52 billion. Remember that Instagram is currently valued around $200B.

Saylor’s bear case predicts Bitcoin will reach $3 million per coin by 2045. At that level, MicroStrategy’s bitcoin would be worth $1,824,000,000,000 (one trillion eight hundred twenty-four billion), or the value of over 9 Instagrams!

His base case predicts Bitcoin reaching $13 million per coin by 2045. This would mean that MicroStrategy’s bitcoin would be worth over $7.9T, or the value of almost 40 Instagrams!

His bull case predicts bitcoin will reach $49 million per coin by 2045. At that level, MicroStrategy’s holdings would be worth $29.8T, or the value of 149 Instagrams (and a truly massive 573x ROI)!

What will happen to bitcoin’s price remains to be seen, but if all goes according to Saylor’s 21/21 Plan, MicroStrategy’s ROI will make Facebook’s acquisition of Instagram look like child’s play.

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