Altvest CEO Warren Wheatley intends to follow in the footsteps of MicroStrategy’s Michael Saylor by pumping cash and borrowings into bitcoin as a way to preserve shareholder value and mitigate currency risk. From Moneyweb.
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CIARAN RYAN: MicroStrategy is a company that has rocked the financial world with a strategy of betting big on bitcoin. Today it owns nearly 480 000 bitcoin, equivalent to about 2% of all BTC ever issued and buying that with spare cash and then plenty of borrowings on top. The average price paid by MicroStrategy was just over $62 000 a coin, which puts it handsomely in profit with bitcoin now trading close to $100 000. Investors who don’t want the hassle of holding and custodying bitcoin can buy MicroStrategy shares as a form of proxy. Its stock price is up about 10 times since 2023. MicroStrategy founder Michael Saylor has become perhaps the world’s loudest evangelist for bitcoin.
Now, a South African company called Altvest Capital is taking a similar route. It’s announced that it will adopt bitcoin as its primary treasury reserve asset and has applied to regulators for permission to raise about R200 million by selling shares to increase its treasury stockpile.
We’re joined by [Altvest] CEO Warren Wheatley to find out more. Hi Warren, thank you very much for your time. The parallels between what you’re doing and MicroStrategy will be obvious to anyone who’s been following this space, but what led to this decision to adopt bitcoin as your primary reserve asset?
WARREN WHEATLEY: Ciaran, thanks and thank you for having me. Glad to be discussing this. Really, what led to this is it’s just been a keen observation of how the markets are unfolding, both, and it’s not only the USA, this is happening across the world, across the major bourses. There are good examples in Hong Kong. A company called Moon Inc. was just a few days ahead of us in announcing this. It all happened in Japan with a company that abandoned its strategy of buying hotels. They called MetaPlanet. But what’s really informed this is a keen observation of the markets, but also a very detailed study by myself. My executive and our board of directors are into what bitcoin means to financial markets, what it means to balance sheets and how it can be used as a treasury. That’s part of the purpose. This treasury function is a precursor to us raising more capital and making these products available, bitcoin specifically, to the public and institutions in ways that we think are more creative and more secure and better governed than just buying these instruments or buying bitcoin on the open market. So that’s really the idea.
From a treasury perspective, the mathematics is quite simple. You look at what your cost of capital is, what you’ve promised shareholders and when you consider the alternatives of where to maintain or hold your available reserves, the answer really always just ends up being bitcoin. And it doesn’t matter what assets you analyse over what time periods, all roads lead to bitcoin.
It is volatile [but] the volatility is reducing significantly. And we’ve also got great examples to learn from. So MicroStrategy is a great one. I wish, though, I had had $500 million to start the project off with. Sadly, we don’t. And that’s why we bought the modest sum of one bitcoin.
My challenge is to replicate the strategy without the massive amount reserves that some of our counterparts or peers who are doing the same thing have. But I have the benefit of being young, nimble with out-of-the-box thinking. And so we carry on and move forward with stealth.
CIARAN RYAN: Yeah, you recently bought one bitcoin, I think for about R1.8 million. So if you raise R200 million and you get permission to do that, you’ll end up with about 100 or maybe 110 Bitcoin. Now, the reason you’ve given was you want to preserve shareholder value. You want to mitigate currency depreciation risks. That’s very understandable. But you also want your shareholders to get some exposure to a globally recognised store of value.
My question is how hard was it to sell this strategy to your board?
WARREN WHEATLEY: If you have a peek at our website, and I hope many of your listeners and readers and viewers do, and it says it in the name, right? Altvest. We are an alternative investment company. So our board is used to me presenting crazy ideas, and we’ve presented crazy ideas. Let’s invest in a lodge on the Sabi River. Let’s invest in a family restaurant in Melville. Let’s do private credit. Let’s do the Springboks. So they’re pretty battle hardened, but moreover, I selected them for them being out-the-box thinkers. Now, all the way from our chairman, Stafford [Masie], who’s a tech entrepreneur, a bitcoin maximalist, all the way through to GG Alcock, exploring ways of modernising and democratising township economies. The guys are quite open to discussion, provided I do the work, I do the research, and I present a cogent case for shareholder value creation and shareholder protection. They’re quite open to discussion. So that wasn’t terribly difficult.
And what helped is that there’s plenty of research and precedent that’s been created over the last few months. And so that was fine. I do need to do the homework though. And that’s done. We’re going to be putting that homework up on the website available to shareholders. And we’re going to be doing a lot of disclosures voluntarily outside of what’s actually required in terms of legislation. And that is an attempt to just be completely transparent, put out and lay out and map out our thinking so that people can buy into the strategy along with us and join us voluntarily for the journey.
CIARAN RYAN: This is a fairly radical approach. You are listed on the stock exchange. You came into the stock exchange, I think, in September last year. What has been the response to this announcement that you are going to adopt bitcoin as your primary treasury reserve asset?
WARREN WHEATLEY: All right. So let me call that up. Office capital is regulated or overseen by a number of regulatory bodies in the country. You know, from the JSE to the FSCA (Financial Sector Conduct Authority) to the Sarb (SA Reserve Bank) to Excon, the Prudential Authority. We’ve got a number of people watching us. What I can say is that provided you play within the prescribed rules and limitations,
Every single regulatory body has been open to us exploring this in a very controlled way. They’ve been open and solution-orientated in their thinking and have been very willing to work with us to solve many of the issues in pursuit of finding the appropriate mechanisms to deal with this from a regulatory perspective.
What I can tell you is from a regulatory and legislation perspective, South Africa is probably in the top 10 in how advanced our thinking about these issues are. And we’ve found that our regulators are progressive and willing to talk and engage on these issues. Having said that, there are procedures to go through and it’s always frustrating for entrepreneurs, but we don’t find an unwilling regulator that’s not willing to engage and solve the issues. I think they’re very cognisant of the fact that this is a tsunami that needs to be dealt with. And I think they’re dealing with it with the best minds we have at our disposal in the country. And everyone is quite open to figuring out the solutions. So that’s the regulatory side. The market has reacted with some scepticism. It immediately improved the share’s liquidity. So, you know, we are in the AltX and liquidity is not great on the best of days. But suddenly, I have a full sell book and a full buy order book. And it’s wonderful for someone on the AltX to have that. It doesn’t often happen. Bitcoiners across the world in every single language have tweeted, reposted, and commented. And I think the announcement must have been seen by at least two to three million people, retweeted by as many. And there’s been an overwhelmingly positive response from the crypto markets worldwide. So I’m quite pleased with how it’s been received.
You know, every company that does this has different experiences when they do the announcement and as they proceed. I’m quite pleased with how our experiences has panned out.
CIARAN RYAN: Okay, Warren, you’re also planning to acquire a stake in the Springbok brand, which you obviously see has got enormous commercial potential. Tell us about that. I mean, you are an alternative investment company, so maybe this is not that strange.
WARREN WHEATLEY: All right, so to understand the Springbok bid, I do need to do a slight precursor to Altvest. So Altvest Capital and why we built it was to solve or to assist in solving two particular problems. The first problem, of course, is to help SMEs or businesses or entrepreneurs in the country raise capital. And we assist them in doing so by creating a mechanism through which those entrepreneurs can access public markets. Long story short, you can think of us in two ways. You could call us a regulated stokvel field where the public all contribute to a single objective, and the stock uses the funds raised to achieve an outcome. Or a crowdfunding platform that’s regulated. Bambanani, as an example, we raise fairly large amounts of capital for a small family restaurant, largely from a customer base. the customers and patrons, and staff, everyone contributed through subscription for an instrument that is listed on the exchange or an exchange.
And those proceeds were used to grow the business and the brand. And that talks to the second objective in that we want to break some of the hurdles around ordinary people participating in alternative asset investment. For example, private equity, venture capital, and even seed capital investing are concepts that are so outside the realm of the retail investor that people don’t even know how to think about them properly. Family offices from across the country or across the world get presented these opportunities. Here’s a portfolio of venture capital opportunities, or here’s a portfolio of private equity opportunities, or here’s a wind farm or a bridge or something exciting, something that has risk metrics that don’t mimic the stock market, so not correlated, but also offer the potential of returns so outside of the normal stock market expectations that it’s unheard of.
Altvest Capital tries to make alternative investment opportunities available to ordinary South Africans. And these are opportunities ranging from private equity, which is an asset class only available to pension funds and family offices or high net worth individuals, all the way through to something like private credit, which is one of the fastest growing asset classes in the world. But again, in South Africa, you know, our competitors have minimums where they’re offered either through an endowment policy, and if you want to invest in endowments, you better make sure your tax rate is above 40%. Alternatively, they’ve got minimum investment amounts that make the asset class completely unavailable or exclusive to high-net-worth individuals. So, if you think about private credit and think that I’d like to add it to my portfolio of investments, you wouldn’t want it to be more than 5%. But if there’s a minimum of let’s say a million rand, that means your portfolio would need to be many times that size to accommodate an investment into private credit.
Altvest breaks all those barriers down. We’ve got a private credit fund. We invite retail investors to invite from as little as three grand a share. We’re going to be bringing in various opportunities, venture capital, seed capital, Chinese venture capital. And where this started, the Springboks, what we want to do is allow for ownership of the Springboks to be held by number one, the players, and the fans, because those are the two groups of people that drive the value of the brand. And without either of them, there is no brand. And who better to own that and to invest in that than those two groups of people? The deal we tried to disrupt with Acklerley Sports Group was one way, again, a private equity fund that is probably funded by pension funds and family offices comes and buys the South African crown jewels. We threw our hats in the ring and said, there’s no need. We’ve got capital in the country. Moreover, we’ve got one of the most loyal fan bases in the world. Why not ask them to fund us and have them own a brand that they love and adore so much and raise the capital in that way. Saru was quite open to the idea.
But there’s again a process to go through, which we’re quite happy to do. There’s some stiff competition with some other competing bids. But we’re not a winner-takes-all kind of entity, or I’m not that kind of guy. I’m quite open to partnerships. I’m quite open to working with anyone else, just so long as our philosophy and ethos can be implemented into the process. I want players to own shares, and I’d love fans and ordinary South Africans to own shares in the brand. And that’s how we structure ourselves. And it’s the same with bitcoin. A lot of people are intimidated by going into bitcoin. You know, the custody and your multi-sig and all these other protocols for securing your bitcoin seem daunting and will remain daunting for a lot of people. And so we want to give people access to the asset in ways that they’ve become comfortable with. Equally, though, now, access to a regulated listed instrument eventually, if we get the approvals that we’re seeking, gives a lot of people comfort. People have faith in our institutions in the country, in particular the JSE.
And the crypto world is still awash with scandals. As recently as Friday, there was a large hack of a big exchange where $1.5 billion of ethereum coins were stolen, apparently by North Korean hackers. And so things like that continue to happen. people are willing to, when I take the risk – but through trusted platforms and we hope we could be one of those.
CIARAN RYAN: How do you expect regulators to react to your application? You want to raise R200 million for bitcoin. Have you had initial discussions? What’s the feedback been like?
WARREN WHEATLEY:
So, like I mentioned earlier, the regulators are open to the discussion. What I need to say is from a regulatory perspective, let me just quickly paint out where South Africa is. Bitcoin and certain other crypto assets are now governed and under the purview of the Financial Services [Sector] Conduct Authority, the FSCA, right? They’ve been classified as financial instruments, and so they are governed by the Financial Markets Act. And so we’ve got a regulatory framework or legal framework for how to deal with these. However, that regulatory framework doesn’t extend all the way through to all investors. other words, right now, Regulation 28, which governs what pension funds can invest in, still prohibits crypto. Number two, there’s a working paper that all the stakeholders have agreed to. It’s a position paper on crypto and crypto adoption. And that contains a clause that prevents JSE companies or any listed companies from investing in crypto products or assets and creating derivative type products on those on a regulated exchange. That clause is outdated and needs to be removed from that working paper. And there’s a committee looking at the mechanisms to do so.
Our process has been to put in front of the committee a working example as to why that clause can be successfully removed. If you think about it right now, these instruments are available to the public in less governed, less controlled, less monitored platforms. So any South African could go into almost any exchange across the world and buy bitcoin. And our regulators recognise the absurdity of that and are working quite furiously, I think, to have these assets or these instruments available through more regulated, more governed, more monitored platforms. And so we found them very willing to engage, very willing to work with us and very open to the prospect.
Regulators need to take their time, consider all the risks. And I appreciate from my perspective that their risk profile is different to mine, the world of their risks is different to mine. And so my job is to remain patient and open and engaging, which I’m doing and trying to do., but from their perspective, we found them to be quite willing and open to engagement and they’ve been very solution-orientated in the way they’ve approached this.
CIARAN RYAN: That’s interesting. And I see your share price is up about 10% since the announcement on Friday. So the response from the market, from the retail side, seems to be quite positive.
WARREN WHEATLEY: It was down 10%, so it’s back.
CIARAN RYAN: It’s come back up, yeah.
WARREN WHEATLEY: Ciaran, it’s also relative. Think. One oke bought like three shares at that price. It helps me sleep better, but I don’t… I try not to lose sleep. Of course, I prefer higher share prices than low ones, but…there’s not much to be read because the liquidity is still not where it is. And we continue to track it. It’s a lot more liquid and there is a functional order book finally, which is the thing I’m most pleased about. yeah, but I wouldn’t read too much into the 10% increase, but equally so, nor the 10% decrease. I think we still find, in a way, that the market is not quite sure how to approach us or what to make of us. And I thank you guys for this interaction where we can start becoming more acquainted with the market and the investors. So any opportunity to talk about what we’re doing is very appreciated.
CIARAN RYAN:Well, thank you very much for joining us. We’re going to leave it there. That was Warren Wheatley, who is the Chief Executive Officer of Altvest Capital.
