On this submit, I’ll deliver collectively two disparate and really completely different subjects that I’ve written about up to now. The primary is the position that money holdings play in a enterprise, an extension of the dividend coverage query, with an examination of why companies usually mustn’t pay out what they’ve accessible to shareholders. In my lessons and writing on company finance, I have a look at the motives for companies retaining money, in addition to how a lot money is an excessive amount of money. The second is bitcoin, which might be seen as both a foreign money or a collectible, and in a sequence of posts, I argued that bitcoin can solely be priced, not valued, making debates about whether or not to purchase or to not purchase totally a operate of notion. In reality, I’ve steered away from saying a lot about bitcoin in recent times, although I did point out it in my submit on different investments as a collectible (like gold) that may be added to the selection combine. Whereas there could also be little that seemingly connects the 2 subjects (money and bitcoin), I used to be drawn to write down this submit due to a debate that appears to be heating up on whether or not corporations ought to put some or a big portion of their money balances into bitcoin, with the success of MicroStrategy, a high-profile beneficiary of this motion, driving a few of this push. I consider that it’s a horrible concept for many corporations, and earlier than Bitcoin believers get riled up, my reasoning has completely nothing to do with what I consider bitcoin as an funding and extra to do with how little I belief company managers to time trades proper. That mentioned, I do see a small subset of corporations, the place the holding bitcoin technique is sensible, so long as there are guardrails on disclosure and governance.
Money in a Going Concern
In a world the place companies can increase capital (fairness or debt) at honest costs and in a well timed method, there’s no use to carry money, however that’s not the world we reside in. For quite a lot of causes, some inside and a few exterior, corporations are sometimes unable or unwilling to lift capital from markets, and with that constraint in place, it’s logical to carry money to fulfill unexpected wants. On this part, I’ll begin by laying out the position that money holdings play in any enterprise, and study how a lot money is held by corporations, damaged down by groupings (regional, dimension, trade).
A Monetary Stability Sheet
To know the place of money in a enterprise, I’ll begin with a monetary steadiness sheet, a construction for breaking down a enterprise, public or non-public:
On the asset facet of the steadiness sheet, you begin with the working enterprise or companies that an organization is in, with a bifurcation of worth into worth from investments already made (assets-in-place) and worth from investments that the corporate expects to make sooner or later (progress belongings). The second asset grouping, non-operating belongings, features a vary of investments that an organization could make, typically to enhance its core companies (strategic investments), and typically as facet investments, and thus embrace minority holdings in different corporations (cross holdings) and even investments in monetary belongings. Typically, as is the case with household group corporations, these cross holdings could also be a mirrored image of the corporate’s historical past as a part of the group, with investments in different group corporations for both capital or company management causes. The third grouping is for money and marketable securities, and that is meant particularly for investments that share two widespread traits – they’re riskless or near riskless insofar as holding their worth over time and they’re liquid within the sense that they are often transformed to money rapidly and with no penalty. For many corporations, this has meant investing money in short-term bonds or payments, issued by both governments (assuming that they’ve little default danger) or by giant, secure corporations (within the type of business paper issued by extremely rated corporations).
Observe that there are two sources of capital for any enterprise, debt or fairness, and in assessing how levered a agency is, traders have a look at the proportion of the capital that comes from every:
- Debt to Fairness = Debt/ Fairness
- Debt to Capital = Debt/ (Debt + Fairness)
In reality, there are numerous analysts and traders who estimate these debt ratios, utilizing web debt, the place they web the money holdings of an organization in opposition to the debt, with the rationale, merited or not, that money can be utilized to pay down debt.
- Web Debt to Fairness = (Debt-Money)/ Fairness
- Debt to Capital = (Debt-Money)/ (Debt + Fairness)
All of those ratios might be computed utilizing accounting e book worth numbers for debt and fairness or with market worth numbers for each.
The Motives for holding Money
In my introductory finance lessons, there was little dialogue of money holdings in corporations, outdoors of the periods on working capital. In these periods, money was launched as a lubricant for companies, needed for day-to-day operations. Thus, a retail retailer that had scores of money clients, it was argued, wanted to carry more money, usually within the type of foreign money, to fulfill its transactional wants, than an organization with company suppliers and enterprise clients, with predictable patterns in operations. In reality, there have been guidelines of thumb that have been developed on how a lot money an organization wanted to have for its operations. Because the world shifts away from money to digital and on-line funds, this want for money has decreased, however clearly not disappeared. The one carve out is the monetary providers sector, the place the character of the enterprise (banking, buying and selling, brokerage) requires corporations within the sector to carry money and marketable securities as a part of their working companies.
If the one motive for holding money was to cowl working wants, there could be no solution to justify the tens of billions of {dollars} that many corporations maintain; Apple alone has usually had money balances that exceeded $200 billion, and the opposite tech giants usually are not far behind. For some corporations, at the least, the rationale for holding far more money than justified by their working wants is that it could possibly function as a shock absorber, one thing that they will fall again on during times of disaster or to cowl surprising bills. That’s the reason that cyclical and commodity corporations have usually provided for holding giant money balances (as a % of their total agency worth), since a recession or a commodity worth downturn can rapidly flip income to losses.
Utilizing the company life cycle construction may present perception into how the motives for holding money can change as an organization ages.
For start-ups, which can be both pre-revenue or have very low revenues, money is required to maintain the enterprise working, since workers should be paid and bills lined. Younger corporations which can be money-losing and with giant damaging money flows, maintain money to cowl future money stream wants and to fend off the danger of failure. In impact, these corporations are utilizing money as life preservers, the place they will make it by means of intervals the place exterior capital (enterprise capital, specifically) dries up, with out having to promote their progress potential at discount basement costs. As corporations begin to generate income, and enter excessive progress, money has use as a enterprise scalar, for corporations that need to scale up rapidly. In mature progress, money acquires optionality, helpful in permitting the enterprise to search out new markets for its merchandise or product extensions. Mature corporations typically maintain money as youth serum, hoping that it may be used to make once-in-a-lifetime investments which will take them again to their progress days, and for declining corporations, money turns into a liquidation supervisor, permitting for the orderly compensation of debt and sale of belongings.
There’s a remaining rationale for holding money that’s rooted in company governance and the management and energy that comes from holding money. I’ve lengthy argued that absent strain from shareholders, managers at most publicly traded corporations would select to return little or no of the money that they generate, since that money steadiness not solely makes them extra wanted (by bankers and consultants who’re endlessly creative about makes use of that the money might be put to) but additionally provides them the facility to construct company empires and create private legacies.
Company Money Holdings
Given the multitude of causes for holding money, it ought to come as no shock that publicly traded corporations world wide have important money balances. Main into July 2025, as an example, international non-financial-service corporations held nearly $11.4 trillion in money and marketable securities; monetary service corporations held much more in money and marketable securities, however these holdings, as we famous earlier, can symbolize their enterprise wants. Utilizing our earlier breakdown of the asset facet of the steadiness sheet into money, non-operating and working belongings, that is what non-financial service corporations within the mixture appeared like in e book worth phrases (international and simply US corporations):
Observe that money is about 11% of the e book worth of complete belongings, within the mixture, for international corporations, and about 9% of the e book worth of complete belongings, for US corporations. World corporations do maintain the next share of their worth in non-operating belongings, however US corporations are extra lively on the acquisition entrance, explaining why goodwill (which is triggered nearly totally by acquisitions) is bigger at US corporations.
The standard publicly traded agency holds a big money steadiness, however there are important variations in money holdings, by sector. Within the desk under, I have a look at money as a % of complete belongings, a e book worth measure, in addition to money as a % of agency worth, computed by aggregating market values:
As you may see, expertise corporations, which presumably face extra uncertainty about their future maintain far more money as a % of e book worth, however the worth that the market attaches to their progress brings down money as a % of agency worth. Utilities, regulated and infrequently secure companies, have a tendency to carry the least money, each in e book and market phrases.
Breaking down the pattern by area, I have a look at money holdings, as a % of complete belongings and corporations, throughout the globe:
The variations throughout the globe might be defined by a mixture of market entry, with nations in components of the world the place it may be tough to entry capital (Latin America, Japanese Europe, Africa) holding more money. As well as, and company governance, with money holdings being better in components of the world (China, Russia) the place shareholders have much less energy over managers.
Given the sooner dialogue of how the motives for holding money can differ throughout the life cycle, I broke the pattern down by age decile, with age measured from the yr of founding, and checked out money holdings, by decile:
The outcomes are combined, with money holdings as a % of complete belongings being increased for the youthful half of the pattern (the highest 5 deciles) than for the older half, however the is not any discernible sample, when money is measured as a % of agency worth (market). Put easy, corporations throughout the life cycle maintain money, although with completely different motives, with the youngest corporations holding on to money as lifesavers (and for survival) and the older corporations preserving money within the hopes that they will use it to rediscover their youth.
The Magic of Bitcoin
I’ve been instructing and dealing with investments now for 4 a long time, and there was no funding that has obtained as a lot consideration from each traders and the monetary press, relative to its precise worth, as has bitcoin. Among the draw has come from its connections to the digital age, however a lot of it has come from its fast rise in worth that has made many wealthy, with intermittent collapses which have made simply as many poor. I’m a novice in relation to crypto, and whereas I’ve been open about the truth that it isn’t my funding choice, I perceive its draw, particularly for youthful traders.
The Brief, Eventful Historical past of Bitcoin
The origin story for Bitcoin issues because it helps us perceive each its enchantment and its construction. It was born in November 2008, two months into one of many worst monetary crises of the final century, with banks and governments seen as largely chargeable for the mess. Not surprisingly, Bitcoin was constructed on the presumption that you just can not belief these establishments, and its greatest innovation was the blockchain, designed as a manner of crowd-checking transactions and preserving transaction integrity. I’ve lengthy described Bitcoin as a foreign money designed by the paranoid for the paranoid, and I’ve by no means meant that as a critique, since within the untrustworthy world that we reside in, paranoia is a justifiable posture.
From its humble beginnings, the place just a few (largely tech geeks) have been conscious of its existence, Bitcoin has collected evangelists, who argue that it’s the foreign money of the longer term, and speculators who’ve used its wild worth swings to make and lose tens of tens of millions of {dollars}. Within the chart under, I have a look at the value of bitcoin over the past decade, as its worth has elevated from lower than $400 in September 2014 to greater than $110,000 in June 2025:
Alongside the way in which, Bitcoin has additionally discovered some acceptance as a foreign money, first for unlawful actions (medication on the Silk Street) after which because the foreign money for nations with failed fiat currencies (like El Salvador), however even Bitcoin advocates will agree that its use in transactions (because the medium of alternate) has not stored tempo with its progress as a speculative commerce.
Pricing Bitcoin
In a submit in 2017, I divided investments into 4 teams – belongings that generate money flows (shares, bonds, non-public companies), commodities that can be utilized to supply different items (oil, iron ore and many others), currencies that act as mediums of alternate and shops of worth and collectibles which can be priced primarily based on demand and provide:
You could disagree with my categorization, and there are shades of grey, the place an funding might be in multiple grouping. Gold, as an example, is each a collectible of lengthy standing and a commodity that has particular makes use of, however the former dominates the latter, in relation to pricing. In the identical vein, crypto has a various array of gamers, with just a few assembly the asset take a look at and a few (like ethereum) having commodity options. The distinction between the completely different funding lessons additionally permits for a distinction between investing, the place you purchase (promote) an funding whether it is underneath (over) valued, and buying and selling, the place you purchase (promote) an funding if you happen to anticipate its worth to go up (down). The previous is a alternative, although not a requirement, with an asset (shares, bonds or non-public companies), although there could also be others who nonetheless commerce that asset. With currencies and collectibles, you may solely commerce, making judgments on worth route, which, in flip, requires assessments of temper and momentum, slightly than fundamentals.
With bitcoin, this classification permits us to chop by means of the numerous distractions that pop up throughout discussions of its pricing stage, since it may be framed both as a foreign money or a collectible, and thus solely priced, not valued. Seventeen years into its existence, Bitcoin has struggled on the foreign money entrance, and whereas there are pockets the place it has gained acceptance, its design makes it inefficient and its volatility has impeded its adoption as a medium of alternate. As a collectible, Bitcoin begins with the benefit of shortage, restricted as it’s to 21 million models, but it surely has not fairly measured up, at the least to this point, in relation to holding its worth (or rising it) when monetary belongings are in meltdown mode. In each disaster since 2008, Bitcoin has behaved extra like dangerous inventory, falling way over the typical inventory, when shares are down, and rising extra, after they get better. I famous this in my posts trying on the efficiency of investments in each the primary quarter of 2020, when COVID laid waste to markets, and in 2022, when inflation ravaged inventory and bond markets. That mentioned, it’s nonetheless early in its life, and it’s totally doable that it might change its conduct because it matures and attracts in a wider investor base. The underside line is that discussions of whether or not Bitcoin is reasonable or costly are sometimes pointless and typically irritating, because it relies upon nearly totally in your perspective on how the demand for Bitcoin will shift over time. Should you consider that its enchantment will fade, and that it will likely be displaced by different collectibles, maybe even within the crypto house, you can be within the quick promoting camp. If you’re satisfied that its enchantment won’t simply endure but additionally attain contemporary segments of the market, you’re on stable floor in assuming that its worth will proceed to rise. It behooves each teams to confess that neither has a monopoly on the reality, and it is a disagreement about buying and selling and never an argument about fundamentals.
The MicroStrategy Story
It’s simple that one firm, MicroStrategy, has executed extra to advance the company holding of Bitcoin than some other, and that has come from 4 components;
- A inventory market winner: The corporate’s inventory worth has surged over the past decade, making it the most effective performing shares on the US exchanges:
It’s value noting that nearly the entire outperformance has occurred on this decade, with the winnings concentrated into the final two years.
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With the rise (more and more) tied to Bitcoin: Virtually all of MicroStrategy’s outperformance has come from its holdings of bitcoin, and never come from enhancements in enterprise operations. That comes by means of within the graph under, the place I have a look at the costs of MicroStrategy and Bitcoin since 2014:
Observe that MicroStrategy’s inventory worth has gone from being barely negatively correlated with Bitcoin’s worth between 2014-2018 to monitoring Bitcoin in newer years.
- And disconnected from operations: In 2014, MicroStrategy was seen and priced as a software program/providers tech firm, albeit a small one with promise. Within the final decade, its working numbers have stagnated, with each revenues and gross income declining, however throughout the identical interval, its enterprise worth has soared from $1 billion in 2014 to greater than greater than $100 billion in July 2025:
It’s clear now that anybody investing in MicroStrategy at its present market cap (>$100 billion) is making a bitcoin play.
- With a high-profile “bitcoin evangelist” as CEO: MicroStrategy’s CEO, Michael Saylor, has been a vocal and extremely seen promoter of bitcoin, and has transformed lots of his shareholders into fellow-evangelists and satisfied at the least a few of them that he’s prescient in detecting worth actions. In latest years, he has been public in his plans to problem rising quantities of inventory and utilizing the proceeds to purchase extra bitcoin.
In sum, MicroStrategy is now much less a software program firm and extra a Bitcoin SPAC or closed-end fund, the place traders are trusting Saylor to make the appropriate buying and selling judgments on when to purchase (and promote) bitcoin, and hoping to profit from the income.
The “Put your money in bitcoin” motion
For traders in different publicly traded corporations which have struggled delivering worth of their working companies, MicroStrategy’s success with its bitcoin holdings appears to point a misplaced alternative, and one that may be remedied by leaping on the bandwagon now. In latest months, even excessive profile corporations, like Microsoft, have seen shareholder proposals pushing them to desert their typical observe of holding money in liquid and close-to-riskless investments and shopping for Bitcoin as a substitute. Microsoft’s shareholders soundly rejected the proposal, and I’ll begin by arguing that they have been proper, and that for many corporations, investing money in bitcoin doesn’t make sense, however within the second half, I’ll carve out the exceptions to this rule.
The Basic Precept: No to Bitcoin
As a normal rule, I feel it isn’t solely a nasty concept for many corporations to speculate their money in bitcoin, however I’d go additional and in addition argue that they need to banned from doing so. Let me hasten so as to add that I’d make this assertion even when I used to be bullish on Bitcoin, and my argument would apply simply as strongly to corporations contemplating transferring their money into gold, Picassos or sports activities franchises, for 5 causes:
- Bitcoin doesn’t meet the money motives: Earlier on this submit, I famous the the reason why an organization holds money, and, specifically, as a shock absorber, steadying a agency by means of dangerous occasions. Changing low-volatility money with high-volatility bitcoin would undercut this goal, analogous to changing your shock absorbers with pogo sticks. In reality, given the historical past of transferring with inventory costs, the worth of bitcoin on an organization’s steadiness sheet will dip at precisely the occasions the place you would want it most for stability. The argument that bitcoin would have made lots increased returns for corporations than holding money is a non-starter, since corporations ought to maintain money for security.
- Bitcoin can step in your working enterprise narrative: I’ve lengthy argued that profitable companies are constructed round narratives that incorporate their aggressive benefits. When corporations which can be in good companies put their money in bitcoin, they danger muddying the waters on two fronts. First, it creates confusion about why an organization with a stable enterprise narrative from which it could possibly derive worth would search to generate income on a facet sport. Second, the ebbs and flows of bitcoin can have an effect on monetary statements, making it tougher to attach working outcomes to story strains.
- Managers as merchants? When corporations are given the license to maneuver their money into bitcoin or different non-operating investments, you’re trusting managers to get the timing proper, by way of when to purchase and promote these investments. That belief is misplaced, since prime managers (CEOs and CFOs) are for essentially the most half horrible merchants, usually shopping for on the market highs and promoting at lows.
- Go away it to shareholders: Even in case you are unconvinced by the primary three causes, and you’re a bitcoin advocate or fanatic, you can be higher served pushing corporations that you’re a shareholder in, to return their money to you, to spend money on bitcoin, gold or some other funding at your chosen time. Put merely, if you happen to consider that Bitcoin is the place to place your cash, why would you belief company managers to do it for you?
- License for abuse: I’m a skeptic in relation to company governance, believing that managerial pursuits are sometimes at odds with what’s good for shareholders. Giving managers the permission to commerce crypto tokens, bitcoin or different collectibles can open the door for self dealing and worse.
Whereas I’m a fan of letting shareholders decide the bounds on what managers can or can not do, I consider that the SEC (and different inventory market regulators world wide) could have to turn into extra specific of their guidelines on what corporations can (and can’t) do with money.
The Carveouts
I do consider that there are circumstances whenever you, as a shareholder, could also be at peace with the corporate not solely investing money in bitcoin, however doing so actively and aggressively. Listed here are 4 of my carveouts to the overall rule on bitcoin:
- The Bitcoin Savant: In my earlier description of MicroStrategy, I argued that shareholders in MicroStrategy haven’t solely gained immensely from its bitcoin holdings, but additionally belief Michael Saylor to commerce bitcoin for them. Briefly, the notion, rightly or wrongly, is that Saylor is a bitcoin savant, understanding the temper and momentum swings higher than the remainder of us. Generalizing, if an organization has a pacesetter (often a CEO or CFO) who’s seen as somebody who is nice at gauging bitcoin worth route, it’s doable that shareholders within the firm could also be prepared to grant her or him the license to commerce bitcoin on their behalf. That is, after all, not distinctive to bitcoin, and you’ll argue that traders in Berkshire Hathaway have paid a premium for its inventory, and allowed it leeway to carry and deploy immense quantities of money as a result of they trusted Warren Buffett to make the appropriate funding judgments.
- The Bitcoin Enterprise: For some corporations, holding bitcoin could also be half and parcel of their enterprise operations, much less an alternative to money and extra akin to stock. PayPal and Coinbase, each of which maintain giant quantities of bitcoin, would fall into this carveout, since each corporations have enterprise that requires that holding.
- The Bitcoin Escape Artist: As a few of you could remember, I famous that Mercado Libre, a Latin American on-line retail agency, is on my purchase record, and it’s a firm with a reasonably substantial bitcoin holding. Whereas a part of that holding could relate to the working wants of their fintech enterprise, it’s value noting that Mercado Libre is an Argentine firm, and the Argentine peso has been a dangerous foreign money to carry on to, making bitcoin a viable choice for money holdings. Generalizing, corporations in nations with failed currencies could conclude that holding their money in bitcoin is much less dangerous than holding it within the fiat currencies of the places they function in.
- The Bitcoin Meme: There’s a remaining grouping of corporations that I’d put within the meme inventory class, with AMC and Gamestop heading that record. These corporations have working enterprise fashions which have damaged down or have declining worth, however they’ve turn into, by design or by means of accident, buying and selling performs, the place the value bears no resemblance to working fundamentals and is as a substitute pushed by temper and momentum. If that’s the case, it might make sense for these corporations to throw within the towel on working companies totally and as a substitute make themselves much more into buying and selling automobiles by transferring into bitcoin, with the elevated volatility including to their “meme” attract.
Even with these exceptions, although, I feel that you just want guardrails earlier than signing off on opening the door to letting corporations maintain bitcoin.
- Shareholder buy-in: If you’re a publicly traded firm contemplating investing some or a lot of the corporate’s money in bitcoin, it behooves you to get shareholder approval for that transfer, since it’s shareholder money that’s being deployed.
- Transparency about Bitcoin transactions/holdings: As soon as an organization invests in bitcoin, it’s crucial that there be full and clear disclosure not solely on these holdings but additionally on buying and selling (shopping for and promoting) that happens. In spite of everything, if it’s a firm’s declare that it could possibly time its bitcoin trades higher than the typical investor, it ought to reveal the costs at which it purchased and bought its bitcoin.
- Clear mark-to-market guidelines: If an organization invests its money in bitcoin, I’ll assume that the worth of that bitcoin will probably be unstable, and accounting guidelines have to obviously specify how that bitcoin will get marked to market, and the place the income and losses from that marking to market will present up within the monetary statements.
As bitcoin costs rise to all time highs, there’s the hazard that regulators and rule-writers will probably be lax of their rule-writing, opening the door to company scandals sooner or later.
Cui Bono?
Bitcoin advocates have been aggressively pushing each institutional traders and corporations to incorporate Bitcoin of their funding decisions, and it’s true that at the least first sight, they are going to profit from that inclusion. Increasing the demand for bitcoin, an funding with a set provide, will drive the value upwards, and current bitcoin holders will profit. In reality, a lot of the rise of bitcoin because the Trump election in November 2024 might be attributed to the notion that this administration will ease the way in which for corporations and traders to affix within the crypto bonanza.
For bitcoin holders, rising institutional and company buy-in to bitcoin could appear to be an unmixed blessing, however there will probably be prices that, in the long term, could lead at the least a few of them to remorse this push:
- Completely different investor base: Drawing in institutional traders and corporations into the bitcoin market won’t solely change its traits, however put merchants who could know how one can play the market now at a drawback, because it shifts dynamics.
- Right here right now, gone tomorrow? Bitcoin could also be in vogue now, however what’s going to the results be if it halves in worth over the following six months? Establishments and corporations are notoriously ”sheep like” of their conduct, and what’s in vogue right now could also be deserted tomorrow. Should you consider that bitcoin is unstable now, including these traders to the combination will put that volatility on steroids.
- Change asset traits: Each funding class that has been securitized and introduced into institutional investing has began behaving like a monetary asset, transferring extra with shares and bonds than it has traditionally. This occurred with actual property within the Eighties and Nineteen Nineties, with mortgage backed securities and different tradable variations of actual property, making it way more correlated with inventory and bonds, and fewer of a stand alone asset.
If the top sport for bitcoin is to make it millennial gold, an alternate or worthy add-on to monetary belongings, the higher course could be steer away from institution buy-in and construct it up with an alternate investor base, pushed by completely different forces and motives than inventory and bond markets.
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