Supporting Statement:

In periods of consistent, and often rampant, inflation, a company’s financial standing is unfortunately measured not only by how well it conducts its business, but also by how well it stores the profits from its business.

Corporations that invest their assets wisely can, and often do, increase shareholder value more than more profitable businesses that don’t. Therefore, corporations have a fiduciary duty to maximize shareholder value not only by working to increase profits, but also by working to protect those profits from debasement.

The average inflation rate in the US over the last four years according to the CPI – which is a remarkably poor and corrupt measure of inflation – is 5.03%1, peaking at 9.1% in June, 2022. But in reality, the true inflation rate is significantly higher than that, with some studies estimating it to be nearly double the CPI at times.2 So a corporation’s assets have needed to appreciate at those rates over the last four years just to break even.

As of March 31, 2024, Microsoft Corporation has $484 billion in total assets,3 the plurality of which are US government securities and corporate bonds that barely outpace inflation (if assuming that the CPI is accurate, which it isn’t, so bond yields are actually lower than the true inflation rate).

Therefore, in inflationary times like these, corporations should – and perhaps have a fiduciary duty to – consider diversifying their balance sheets with assets that appreciate more than bonds, even if those assets are more volatile short-term.

As of June 25, 2024, the price of Bitcoin increased by 99.7% over the previous year,4 outperforming corporate bonds by roughly 94% on average.5 Over the past five years, the price of Bitcoin increased by 414%,6 outperforming corporate bonds by roughly 411% on average.7

Microstrategy – which, like Microsoft, is a technology company, but unlike Microsoft holds Bitcoin on its balance sheet – has had its stock outperform Microsoft stock this year by 313%8 despite doing only a fraction of the business that Microsoft has. And they’re not alone. The institutional and corporate adoption of Bitcoin is becoming more commonplace. Microsoft’s second largest shareholder, BlackRock, offers its clients a Bitcoin ETF.

Bitcoin is a more volatile asset, at the moment, than corporate bonds, so companies should not risk shareholder value by holding too much of it. However, as Bitcoin is an excellent, if not the best, hedge against inflation and corporate bond yields are less than the true inflation rate, companies should also not risk shareholder value by ignoring Bitcoin altogether. At minimum, companies should evaluate the benefits of holding some, even just 1%, of its assets in Bitcoin.