Is Semler Scientific Adopting MicroStrategy’s Bitcoin Treasury Playbook?
On Tuesday, Semler Scientific, Inc. (Nasdaq: SMLR), a medical software company, announced that it had purchased 581 bitcoins for approximately $40 million as part of its “bitcoin treasury strategy.”
In the wake of the announcement, some paralleled the company’s strategy to MicroStrategy’s, which has entailed converting almost all of its treasury into bitcoin.
Caught my 👀
Today Semler Scientific announced a #bitcoin Treasury strategy similar to Microstrategy @saylor
– acquired $BTC 8% of enterprise value
– 5X EV/EBITDA
– 8X P/E ratio
A #smallcap version of $MSTR and $SMLR is in the Russell 2000 $IWM ?https://t.co/5RGbreCTaj pic.twitter.com/vajSZM4zUz
— Thomas (Tom) Lee (not drummer) FSInsight.com (@fundstrat) May 28, 2024
“I couldn’t help but notice what MicroStrategy accomplished,” Semler Scientific Chairman Eric Semler told Bitcoin Magazine.
“It’s amazing what they’ve done. They have this great story of taking a company that was basically trading at the market value — its cash was its complete value — and just turning that cash into a growth asset through their purchases of Bitcoin,” he added.
“It was a brilliant move on Michael Saylor’s part, and he’s obviously proven himself with that strategy.”
While Semler clearly admires Saylor’s bold move, he seems a bit more conservative in his approach to adding bitcoin to his company’s treasury, as he stated that Semler Scientific doesn’t plan to stray from its core mission — producing high-quality medical software — as it makes bitcoin its primary treasury asset.
“You have to go slowly and just figure out what the right approach for you as a company is,” said Semler.
“We have a medical device software business. We have to weigh the pros and cons of that business and our bitcoin investments,” he added.
With that said, Semler seems to be a true Bitcoin believer.
“Philosophically, I see merit in the argument that bitcoin is a really great alternative to gold,” he said. “I believe in gold, but I believe that bitcoin is kind of gold with optionality.”
He went on to state how he appreciates Bitcoin’s perfect scarcity, its technical durability and its “architectural resilience.”
He also sees the writing on the wall in that Bitcoin is a technology that the millennial generation is embracing, while bitcoin the asset still only has approximately one tenth of the market capitalization of gold.
“I’ve become a believer, and coinciding with that belief, I thought, maybe buying bitcoin is a really good use of our excess cash.”
And Semler Scientific has been flush with excess cash, as its a “very high-margin business,” according to Semler.
After considering options like stock buybacks or investing the cash in the company’s treasury to earn a yield, Semler and his board arrived at the idea of using a notable portion of the cash to buy bitcoin.
Well-versed in capital markets as well as in investing in small- and mid-cap (SMID-cap) businesses — companies like Semler Scientific itself, which has a market cap of about $227 million — Semler knows that SMID-cap companies need to do something if they want to stand out to investors.
“It takes a lot for a SMID-cap company to get the attention of investors,” explained Semler.
“When you can do something dynamic — like invest in digital gold when not a lot of other people are doing it — that’s meaningful and significant,” he added.
“If I were an investor, I’d take a closer look just because it’s differentiated.”
Semler Scientific’s stock is currently trading at just over $32, approximately 50% higher than it was trading before its bitcoin treasury announcement.
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