Microsoft is urging shareholders to vote against a new proposal at its upcoming annual meeting on December 10th, which calls for the tech giant to diversify its corporate treasury by investing in Bitcoin. Filed as “Assessment of Investing in Bitcoin,” the proposal suggests that Microsoft consider Bitcoin as a hedge against inflation, a recommendation put forth by the conservative think tank, The National Center for Public Policy.
The proposal argues that traditional investments, like corporate bonds, yield minimal returns that barely keep up with inflation. Bitcoin, the document contends, represents an alternative investment capable of preserving asset value during inflationary periods, even if it is prone to short-term volatility. In light of recent inflationary pressures, proponents of the proposal argue that Microsoft could potentially benefit from a diversified portfolio that includes assets expected to appreciate faster than bonds.
Board’s Position on Bitcoin Investment
Microsoft’s board is advising shareholders to vote against the proposal, stating that the company already has well-established processes to manage and diversify its assets with shareholder interests in mind. According to a filing submitted to the Securities and Exchange Commission (SEC) on Thursday, the board emphasized that Microsoft’s treasury management team has routinely considered a wide array of investment options, including Bitcoin and other cryptocurrencies, as part of its long-term asset strategy.
Microsoft’s major shareholders, including Vanguard, BlackRock, and State Street, are likely to follow the board’s recommendation given its strong preference for traditional asset allocation methods. The board’s statement noted, “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 Rationale Behind the Proposal
The National Center for Public Policy, which proposed the Bitcoin investment strategy, is aligned with Project 2025, a policy initiative focused on expanding presidential powers and promoting conservative social values in future administrations. The think tank claims that Microsoft should consider holding at least 1% of its assets in Bitcoin to mitigate inflation risks without putting significant shareholder value at stake.
This proposal comes as Bitcoin has increasingly garnered attention from tech companies looking for asset diversification. MicroStrategy, a major proponent of Bitcoin investment, has benefitted from this strategy; it has accumulated 252,220 Bitcoins since 2020, currently valued at around $17 billion. This pivot has led MicroStrategy’s stock to soar by 250% in the past year, compared to Microsoft’s more modest 16% gain.
Industry Context and Future Outlook
While Microsoft’s board maintains a cautious stance, Bitcoin’s appeal as a hedge against inflation is not unprecedented in the tech industry. Many companies, including Tesla and Square, have previously adopted Bitcoin as a treasury asset, citing its potential to safeguard against inflation. However, the board’s decision reflects Microsoft’s conservative financial approach, emphasizing the company’s commitment to stability over potentially volatile gains.
The board’s recommendation to decline the proposal underscores Microsoft’s established treasury management strategy, which has thus far proven effective at supporting steady growth. The decision comes amidst a broader conversation on cryptocurrency’s role in corporate finance, with more companies exploring digital assets as part of their investment strategies.
As the shareholder meeting approaches, Microsoft’s conservative approach to Bitcoin investment stands in contrast to the more aggressive strategies adopted by companies like MicroStrategy, positioning Microsoft as a company focused on safeguarding assets through diversified yet cautious financial practices.
