Balance Sheets Are Being Used As A New Tool By Public Companies
To investors, The best performing public stock in the entire world was Metaplanet, a former hotel company that transformed itself into a bitcoin treasury company. CEO Simon Gerovich was facing a tough outlook, so he decided to plug his business and their balance sheet into the bitcoin network. The results speak for themselves.
Metaplanet’s stock has risen more than 4,800% in the last 12 months. A big reason for the performance is a pioneering model for public companies — weaponizing their balance sheet. Historically, companies could improve their business by increasing revenue and decreasing operating expenses. The best companies did both simultaneously. But Michael Saylor came along and began buying bitcoin for MicroStrategy’s balance sheet. As the asset appreciated in price, the company’s stock continued to accelerate higher. As the stock went higher, more investors were willing to give the company capital on attractive terms. The flywheel was underway and MicroStrategy (newly named Strategy) has a $80 billion market cap. Metaplanet saw the success, but asked “why can’t other companies do the same thing?” The answer is now clear — putting bitcoin on your balance sheet is a winning strategy. But I don’t think the game is going to end there. I believe the cat is out of the bag and we are going to see a big trend of companies putting various assets on their balance sheet to capture the appreciation instead of staying 100% focused on revenue and expenses. Unlike Berkshire Hathaway who has approximately 20% of their total assets in public stocks with no majority control, these new businesses are going to look to put 90% or more of their total assets into capital appreciation opportunities on the balance sheet. One example of where you can see this balance sheet idea playing out with other assets is Sol Strategies (CSE: HODL | OTC: CYFRF). They have positioned themselves as the MicroStrategy of Solana. I started working with the company last year and they told me their goal was to (1) acquire as much SOL as possible, (2) stake their SOL to drive more SOL via staking rewards to their balance sheet, and (3) acquire other validators to acquire even more SOL. Over the last 6 months, Sol Strategies has seen their stock appreciate more than 3,200%, so it is safe to say the strategy is working. The company announced earlier this week they acquired more SOL for the balance sheet. This brings their total holdings to approximately $42 million. Additionally, Sol Strategies revealed they have been selected as the staking partner for 3iq’s proposed Solana Staking ETF, which positions the company to continue driving revenue and profit dominated in SOL. This profit ends up as SOL on their balance sheet and gets staked to drive even more revenue and profit. I think of this business as a MicroStrategy for Solana, but with one key advantage — cash flow profitability. As an investor, it is clear to me the weaponized balance sheet strategy is going to drive returns if executives pick the right assets over the right time frames. Bitcoin will likely continue to perform well for decades to come. Various altcoins will be hit or miss depending on the asset and the market cycle. But I see people expanding this strategy even further than crypto. It would not surprise me to see public companies put other liquid assets on their balance sheet (ex: gold is hitting new all-time high, so it wouldn’t surprise me if someone does MicroStrategy for gold). I also anticipate someone will try to execute this plan with illiquid assets as well. The further people get from bitcoin, the higher the risk in my opinion. But investors are ultimately going to speculate. They are taking risk and seeking a return commensurate to the risk. When multiple companies are seeing their stock price appreciate thousands of percent by leveraging the same strategy, it is not hard to predict other companies will quickly try to copy the winning plan. Capital markets are quickly changing. There are now three levers to pull to improve your business — increase revenue, decrease expenses, weaponize your balance sheet. Keep an eye on this new trend because those companies will likely outperform. It is working for Metaplanet and Sol Strategies. They won’t be the last ones. Hope you have a great day. I’ll talk to everyone tomorrow. – Anthony Pompliano Founder & CEO, Professional Capital Management Today’s letter is brought to you by Bitcoin Investor Week!
I am hosting Bitcoin Investor Week in New York City from February 24-28th. It is the largest annual meeting for sophisticated Wall Street investors who are interested in bitcoin. Speakers include Cathie Wood, Vivek Ramaswamy, Mike Novogratz, Senator Cynthia Lummis, Jan van Eck, Anthony Scaramucci, Jack Mallers, Natalie Brunell, and many more. This is an entire week of high-quality conversations with the top people across traditional finance and bitcoin. The venues are incredible. The planned events will be incredibly fun. And I promise you will learn something, along with make important connections, if you attend this year. This will be one of the highest quality bitcoin conferences of the year. See you there! The US Will Buy Bitcoin, Add Tariffs, and Eliminate Pennies?Polina Pompliano, Author of ‘Hidden Genius’ and Founder of The Profile, and Anthony Pompliano, Author of ‘How To Live An Extraordinary Life’ and CEO of Professional Capital Management, discuss bitcoin, tariffs, Trump’s plan to stop production of pennies, and what’s going on with OpenAI, Elon Musk, Sam Altman. Enjoy! Podcast Sponsors
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research. DISCLAIMER: The author of this letter is not a securities dealer or broker, investment adviser or financial adviser, and you should not rely on the information herein as investment advice. The author is a paid advertiser. If you are seeking personal investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on this communication. Pursuant to a 24 month term advisory agreement dated November 25, 2024, the author was compensated by Sol Strategies Inc. for services such as this letter. Examples that the author provides of share price increases pertaining to a particular Issuer from one referenced date to another represent an arbitrarily chosen time period and are no indication whatsoever of future stock prices for that Issuer and are of no predictive value. Stock profiles contained herein are intended to highlight certain companies for your further investigation; they are not stock recommendations or constitute an offer or sale of the referenced securities. The securities issued by the companies profiled should be considered high risk; if you do invest despite these warnings, you may lose your entire investment. Please do your own research before investing, including reading the SEDAR+ filings, press releases, and risk disclosures. It is our policy that information contained in this profile was provided by the company, extracted from SEDAR+ filings, company websites, and other publicly available sources. The author believes the sources and information are accurate and reliable but cannot guarantee it.You’re currently a free subscriber to The Pomp Letter. For the full experience, upgrade your subscription.
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