Microsoft Bitcoin Investment: Yay Or Nay?

In a recent SEC filing dated Thursday, October 24, Microsoft Corporation (NASDAQ: MSFT) revealed that an “Assessment of Investing in Bitcoin”

Microsoft Corporation (NASDAQ: MSFT) recently filed a form 14A with the Securities and Exchange Commission. This filing unveils an upcoming shareholder proposal, set to be voted on at the forthcoming annual meeting on December 10, to conduct an “Assessment of Investing in Bitcoin.”

This development has sparked discussions within the investment community, considering the potential direction of Microsoft’s treasury strategy and the likelihood of shareholder approval for this proposal. Here's a closer look at the details.

proposal details

The proposal, submitted by an investment fund, requests that Microsoft's board of directors evaluate the feasibility of allocating a portion of the company's treasury reserves to Bitcoin. The proposal cites the recent macroeconomic backdrop, soaring inflation rates, and the need for diversification as key rationales for considering Bitcoin.

The proposal also highlights Bitcoin's status as the largest cryptocurrency by market capitalization and its remarkable performance over the past decade. Furthermore, the proposal argues that adding Bitcoin to Microsoft's treasury aligns with the company's objective to generate strong returns for its shareholders over the long term.

board recommendation, vanguard’s stance

As is customary, Microsoft's board of directors has put forth its official recommendation regarding the shareholder proposal. In supplementary materials filed with the SEC on October 25, the board has advised shareholders to vote against the proposal, stating that the requested assessment is redundant.

The board highlights that Microsoft's management already integrates considerations of cryptocurrencies into their broader investment strategy. This statement underscores the company's ongoing evaluations of a wide range of investable assets to fund Microsoft's operations and includes assets expected to provide diversification and inflation protection.

The filing further noted that past evaluations have included Bitcoin among other cryptocurrencies. “Past evaluations have included Bitcoin and other cryptocurrencies among the options considered, and Microsoft continues to monitor trends and developments related to cryptocurrencies to inform future decision making,” the filing adds.

The board expressed confidence in Microsoft's existing processes to manage and diversify its corporate treasury for the long-term benefit of shareholders, rendering the public assessment unnecessary. “Microsoft has strong and appropriate processes in place to manage and diversify its corporate treasury for the long-term benefit of shareholders and this requested public assessment is unwarranted.”

Microsoft's shareholder base is a diverse mix of institutional investors, public companies, and individual investors. As of June 30, 2024, institutional investors held approximately 43.13% of Microsoft's outstanding shares, while public companies and individual investors accounted for 56.84%. Insiders held a negligible 0.04% of the shares.

The Vanguard Group stands as Microsoft's largest shareholder, owning around 9.09% of the total shares outstanding. BlackRock follows with a 7.45% stake, making it the second-largest shareholder. State Street holds the third-largest position with a 4.04% ownership.

Given this distribution, these major shareholders could be pivotal in determining the outcome of the proposal. Vanguard's anti-BTC stance suggests a likely “no” vote, aligning with the board's recommendation.

Conversely, BlackRock has become a strong proponent of Bitcoin and offers its US clients a spot Bitcoin ETF since January this year. In their latest earning call, CEO Larry Fink said, “We believe Bitcoin is an asset class in itself.” He added, “It is an alternative to other commodities like gold.”

State Street seems somewhat open-minded to Bitcoin. In mid-September, State Street launched in collaboration Galaxy 3 new crypto ETFs. In August, State Street partnered with Taurus to enhance its crypto services, facilitating the transformation of real-world assets into tradable digital assets.

analyst expectations

Industry analysts largely predict that the proposal to invest in Bitcoin will not gain sufficient support among Microsoft shareholders. Matthew Sigel, Head of Digital Assets Research at VanEck, summarized the situation on X: “Microsoft Shareholders to Vote on Proposal to Invest in Bitcoin. MSFT Board Advises ‘Nay’. No-Coiner Vanguard owns ~9%.”

Similarly, Nate Geraci, President of The ETF Store and Co-Founder of the ETF Institute, expressed his expectations: “Gonna go out on a limb & predict Microsoft’s largest shareholder (Vanguard) will be voting ‘no’ on adding btc to the balance sheet…”

Di Lewis, CFO at BTC Inc., also expressed strong skepticism about Microsoft’s likelihood to adopt Bitcoin, stating there is “0% chance Microsoft adds bitcoin to their balance sheet this decade.” Adam Cochran, a partner at CEHV, dismissed the proposal as a “fringe” idea from a think tank shareholder. He stated, “No. This is a fringe proposal by a think tank shareholder, and is not a serious consideration by Microsoft at large.”

At press time, BTC traded at $67,608.

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