Find out how Semler Scientific’s Bitcoin strategy led to a massive stock surge.
Shares of Semler Scientific (SMLR 26.97%) soared on Tuesday. The medical device maker’s stock peaked at a 43.1% single-day gain at 2:15 p.m. ET, boosted by a new cash-management strategy. More to the point, Semler’s new treasury plan is all about Bitcoin (BTC -1.83%) instead of cash.
Why Semler Scientific chose Bitcoin over cash
In an early-morning press release, Semler said it looked over various treasury strategies and settled on a heavy investment in Bitcoin. With $62.8 million of cash reserves at the end of March, the company has bought 581 bitcoins for a total of $40 million. That’s an average price point of approximately $68,850 per Bitcoin, roughly in line with current market prices.
Management explained that Bitcoin looks like “a reliable store of value and a compelling investment.” They like the cryptocurrency’s built-in scarcity, making it a safe bet amid global-inflation trends. Chairman Eric Semler also gave Bitcoin a favorable comparison to physical gold, whose global market value is about 10 times Bitcoin’s.
“Given the gap in value between gold and bitcoin, we believe that bitcoin has the potential to generate outsize returns as it gains increasing acceptance as digital gold,” Semler said.
He also underscored Bitcoin’s growing stature in institutional investing, boosted by the recent approval of spot Bitcoin exchange-traded funds (ETFs).
Juggling crypto investments and the medical device business
Elsewhere in the announcement, Semler’s leaders reminded investors that the company is all about fighting chronic diseases. Its flagship product, the QuantaFlo blood flow testing device, may soon expand its medical clearance to include diagnosing cardiovascular diseases. The Bitcoin idea doesn’t make Semler a cryptocurrency investment — it’s only an effort to protect and maybe grow Semler’s cash reserves in the long run.
But investors see an echo of enterprise software maker MicroStrategy (MSTR -0.50%) here. The software business is still active but largely ignored by market makers, effectively making MicroStrategy a direct play on Bitcoin’s future. Semler is heading down the same uncharted path.
Only a handful of companies own more Bitcoin than Semler Scientific, especially if you exclude crypto specialists such as Bitcoin mining experts. And Semler is a microcap stock with a market value of just $213 million today — after the Bitcoin-based jump.
In other words, Semler Scientific just became a crypto stock despite management’s assurance that the main business remains 100% medical. This stock will probably rise and fall alongside Bitcoin’s price moves from this point on, for better or worse.
Anders Bylund has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Semler Scientific. The Motley Fool has a disclosure policy.