Phong Le: Yes. Thanks, Shirish. I guess we talked quite extensively during our prepared remarks about the Bitcoin development company. I think perhaps the question is more specific about the development portion and whether we’re doing any software development in the Bitcoin area. For those who are attending Bitcoin for corporations on Wednesday, we’ll have about a half day talking about the technology ecosystem associated with Bitcoin. And we’ll also share some new developments in an area of Bitcoin security that we’re working on. And I think people will be excited to see some of the things we’re doing in that space. We continue to experiment and continue to advocate for Bitcoin development, and so there’s more work going on in that area that we’ll share, in a couple of days.
Shirish Jajodia: Great. Thanks, Phong. Next question is for Michael. MicroStrategy’s equity premium towards Bitcoin Holdings has expanded materially over the past few months. And, despite the recent Bitcoin pullback, the premium remains healthy? How do you think about the premium and what do you attribute this to?
Michael Saylor: I think that if we had no leverage and we generated no accretion, then we would start to look like a Spot Bitcoin ETF. But the fact — if we have leverage, then the leverage will justify a premium. If the leverage was if we just had a $1 billion of leverage and we were paying 10% interest, it would be a small premium. We would be basically levering a $1 billion at 10% interest that’s yielding where Bitcoin is appreciating at 40% or more. So there would be definitely a premium, but it would be the difference between the leverage and the yield of Bitcoin or the depreciated Bitcoin on a small amount of money on a $1 billion. But if we have more leverage and if the cost of the capital is lower, then that justifies a higher premium.
So when you get to $3 billion of converts and when the converts are 50 basis points, then you’ve got more leverage and you’ve got a lower cost to capital. So I think that justifies a higher premium. When you’re able to issue billions of dollars of equity at that premium, then that justifies in turn an even higher premium. And it also strengthens the capital structure, providing us with unpledged assets that, that we can use for future financings are used to leverage future corporate opportunities. And then, of course, when we’re able to do, convertible issuances and then convert it into Bitcoin and capture, not just the premium upfront, but the benefits over the next six years of Bitcoin appreciation, that justifies another premium. So you could imagine if you could, if you thought you could generate an 8% accretion per year, there’s no reason why you couldn’t justify a 100% or more premium in that asset value.
If you could generate, an 8% accretion more often than once a year, if you could do it from quarter-to-quarter or every other quarter or do anything, consistently over time, then, it’s quite possible to come to any number of different premium calculations. Ultimately, you know, the company’s premium is a function of our ability to execute over a long period of time and also, you know, the market’s view as to whether or not they appreciate that. And of course, that’s a shifting sentiment, and there’s uncertainty into the future. So there will continue to be uncertainty about what the right premium ought to be, and I think that’s what makes the market.
Shirish Jajodia: Thank you, Michael. The next question is regarding Michael’s 10B51 plan. Has the plan, to exercise MicroStrategy stock options completed already? And can you please provide further color on the executed plan and the thought process behind the stock sales?
Phong Le: Yes, Shirish, let me take that one. So I guess, first off, Michael’s option exercises were planned and actually fully disclosed. I believe it was in our Q3 filing of last year. And as most know, as officers and directors of the company, we have to put in place a 10B51 plan, which discloses that upfront. The plan was, related to, 400,000 options, which, Michael received back in 2014, which were set to expire, this April. So, you know, the sales were programmatic. Michael sold 5,000 shares, on each trading day between Jan 2 and April 25 at market prices. And, again, the sales were executed under the plan. It was completed on the 25, as disclosed, and he does not have any additional 10B51 plan in place at the time. So it’s worth noting also, that, obviously, Michael still holds a significant ownership stake in the company.
And I know there’s been a lot of some questions and chatter around on the sales, but it’s really as simple as, they were put in place, disclosed and programmatic, to do so before, his options expired.
Shirish Jajodia: Thanks, Andrew. We’re coming to the end of the time. We’ll take one last question here. This one is for Phong. Can you please elaborate on the progress of converting software clients to Cloud from license and the AI related partnerships?
Phong Le: Yeah. So, you know, they’re one and the same. A lot of our AI and cloud partnerships are with the large hyperscalers, especially Microsoft, AWS, and Google Cloud. We’re being pretty aggressive working with our hyperscalers and our partners this year to get as many customers to cloud as possible. We have some pretty ambitious plans. You’ll note, and Andrew noted, that, that does have a short-term impact of product license revenue because the product license revenue represents the incremental revenue of on-prem customers, and we’re trying to — as we move customers to cloud. You’ll see that offset, overtime. So moving fast using our partners, AI is only available in the cloud, so it’s another impetus for customers to move to cloud, but it’ll have some short-term disruption in our product license revenue and our total revenue.
