The phrase "No doubt a German bank" has long been a quip among financiers, often surfacing when pondering which institutional investor might have been naive enough to snap up a dubious financial product.
This joke harks back to the sub-prime crisis, when it emerged that many German regional banks were laden with toxic debt securities, eagerly offloaded by their North American counterparts. These banks were seen as easy marks in Europe. Does history repeat itself?
Perhaps not on such a grand scale, but our analysts were intrigued to find that Allianz, a German insurer, was the primary buyer—snapping up a quarter of the issue—of the latest 0% convertible bonds from MicroStrategy.
MicroStrategy has been a topic of discussion here before, notably in the column MicroStrategy Incorporated: Good and bad sides of the trade. While it's a stretch to label the deal a Ponzi scheme, MicroStrategy is indeed raising capital at no cost, channeling it into a highly speculative asset with no yield, thereby inflating its share price.
Meanwhile, MicroStrategy president Michael Saylor is steadily selling his shares. Why would he be worried? MicroStrategy holds 331,200 bitcoins, valued at $31 billion at current cryptocurrency prices. Subtracting $4 billion in debt, the company's equity value stands at $27 billion. However, this could evaporate quickly if bitcoin's value drops, compared to a current market capitalization of $85 billion.
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