In an interesting development, Microsoft is urging its shareholders to reject a proposal to explore bitcoin as a diversification investment, citing certain risks associated with the cryptocurrency.
Bitcoin as an “excellent” hedge against inflation
A think tank, the National Center for Public Policy Research (NCPPR), plans to submit to Microsoft a bitcoin investment proposal, presenting bitcoin as an “excellent” hedge against inflation.
NCPPR suggests allocating at least 1% of Microsoft’s total assets to bitcoin.
As shown in a filing at the United States Securities and Exchange Commission (U.S SEC), NCPPR will propose a Bitcoin Diversification Assessment to Microsoft shareholders at the company’s annual meeting on December 10.
The idea of bitcoin as a hedge against inflation is not news though. Millions of retail users globally already hold bitcoin for this purpose, while some institutional investors, such as BlackRock and Fidelity (both Microsoft shareholders coincidentally) already see bitcoin as a digital gold.
In November 2023, the National Bureau of Economic Research (NBER), Cambridge, in one of its working papers, had found that “inflation expectations are positively correlated with crypto investing.” In the research, NBER constructed a measure of consumer-level exposure to inflation based on their categorical inflation and personal consumption baskets. This showed that “investors who are more exposed to inflation are more likely to invest in crypto.” It also found that “this relation is stronger among more financially sophisticated investors and those with less stable incomes, providing some evidence that crypto may be seen as one potential hedge against rising inflation.”
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Read also: Price Forecast: “$13 million is the Bitcoin Base Case,” predicts Michael Saylor of MicroStrategy.
Microsoft’s board rejects proposal; votes stability over volatility.
Microsoft board has rejected the proposal requesting the tech giant to allocate at least 1% of its total assets to bitcoin.
The board strongly recommends that shareholders should vote against the proposal. According the board, Microsoft already “carefully consider” bitcoin and other cryptocurrencies in their investment evaluations. The result? NO, bitcoin is too volatile.
“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”, Microsoft board argued in its opposition statement.
Maintaining its opposition, Microsoft board pointed out the issue of volatility. As far as the board is concerned, ensuring liquidity and operational funding requires “stable and predictable investments.”
“As the proposal itself notes, volatility is a factor to consider in evaluating cryptocurrency investments for corporate treasury applications that require stable and predictable investments to ensure liquidity and operational funding. 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,” the Microsoft board argued.
“Microsoft has strong and appropriate processes in place to manage and diversify its corporate treasury for the long-term benefit of shareholders… This requested public assessment is unwarranted.”
Read also: Stability vs Speculation: As Bitcoin wallets activity ratio tanks to a lower low since 2010.
Over to Microsoft shareholders to decide December 10
The bitcoin investment proposal will be discussed at Microsoft’s annual meeting on December 10.
Top Microsoft shareholders include Vanguard, BlackRock, State Street, Fidelity, and Geode Capital Management. Interestingly, BlackRock and Fidelity are one of the big believers in bitcoin as a store of value (digital gold). It will be interesting to see how the voting result and pattern go at the Microsoft shareholders meeting.
Come December 2024, will Microsoft join the list of public companies who have invested a part of their total assets in bitcoin?
Despite bitcoin’s volatility, a few public companies have invested some percentage of their total assets on bitcoin, considering it a viable investment option. Notably, MicroStrategy initial paved the way for other institutional investors in 2020 and has never looked back ever since.
- MicroStrategy: A cloud software company that purchased $425 million worth of bitcoin in August and September 2020.
- Tesla: The electric vehicle and clean energy company has invested in bitcoin, although the exact amount is not publicly disclosed.
- Coinbase: A cryptocurrency exchange platform that has also invested in bitcoin.
- Other notable companies: Block, Marathon Patent Group, Hut 8 Mining Corp, Galaxy Digital Holdings, CleanPark, and Bitcoin Group SE have also invested in bitcoin.
This development highlights the ongoing debate on cryptocurrency adoption among institutional investors. Will Microsoft’s stance influence other corporations, or will the think tank’s proposal spark more interest in bitcoin as a hedge against inflation?
Read also: Bitcoin price nears $70,000 as US bitcoin spot ETFs hit record high in net inflows.
