The Bitcoin Strategy of Semler Scientific

Companies that have underperformed, that are unloved by the market, companies with depressed valuations, companies with a lot of cash on their balance sheet, and companies that are generating cash, that's how I think about a zombie company. Smaller companies generally attract fewer investors. Companies that aren't growing tend to attract fewer investors, and companies that aren't maximizing their balance sheets, they tend to not do well either, and especially companies with a lot of Cash that are controlled by shareholder or founder and so forth, those are kind of off limits to activist investors. So you, you see companies like that that are just like, you're like, "What is going on here? " And the one that I initially focused on was Zoom Communications, because this is a big company. I mean, they have a twenty-five billion dollar enterprise value and they have about eight billion dollars in net cash and they generate like two billion dollars of free cash flow. So like, it's, it's, it's just shocking, and they, they buy back stock, but- Not that much, and it hasn't really been that accretive for them to do that, and so they should very seriously consider something much more accretive like buying Bitcoin on their balance sheet

Hi everyone, and welcome back to Stephan Livera podcast, brought to you by Bold. For American listeners, you can buy Bitcoin over at getbold.io. Now, joining me today is Eric Semler. Eric is the chairman of Semler Scientific, and many of you may know, this is a company who has adopted the Bitcoin strategy And, really excited to chat a bit about this. So first of all, welcome to the show, Eric. Thanks, it's great to be here. So Eric, let's start with a little bit of a background on, on your company journey before we get into the Bitcoin stuff. So, you know, for people who aren't familiar, what is-- Tell us a little bit about how Semler Scientific got started.

Sure. Semler Scientific was started about twenty years ago. It's a medical device and software business that my father, Herbert Semler, Who is, no longer involved in the company, but, was, you know, the, the founder and the, a great pioneer and visionary in the cardiovascular space. My dad is, in living in Portland at age ninety-six, so he's still going strong, coming up with ideas like every other week. But, it's how I grew up with a father that was always, a great cardiologist, but always super inventive and, y-you know, he, he, he invented some of the earliest, cardiac monitoring devices, back in the late '60s, and, had some am- amazing products that he, while he practiced medicine. Anyway, Semler Scientific was started twenty years ago. I was, the one of the primary investors in it to, to seed it, and, about ten years ago, it went public, and, and, had an amazing run, with this one, device that it has called QuantaFlow. QuantaFlow is a Pretty simple, screening device in with that uses an infrared, sensor to, to, to screen people for peripheral artery disease. Can do other things as well, but it's, it, it's been used for screening people for peripheral artery disease, which is a, which is a silent killer. About half the people who have peripheral artery, artery disease, PAD, don't know they have it. they're ain't s-asymptomatic. So it's really important to screen for it. If they do have it, they have a much higher probability of having heart disease, a stroke, amputations. There's hundreds of thousands of amputations a year that, you know, don't need to happen. you know, as if people can be screened for this. So it's a, it's a preventative type of, procedure to help people avoid getting much, very serious, problems down the road. And, there's been some, there's been some, work done on, research done on, you know, what type of savings PADD screening has provided, and there's, estimates as high as like four hundred billion dollars. So there's, there's, there's, there's a real need for this device that saved hundreds of- of thousands of lives, and, it, it, unfortunately, is, it disproportionately affects black men, women, and Hispanics. So it's, it's, it's a really, really, valuable, value-added device. There's really no, viable alt-alternative. It takes about, Two to four minutes to do this procedure in a doctor's office, you put the device on, on your, on two fingers and two toes, and then within a few minutes you, you can, come up with, you know, you can help in the diagnosis of PAD. I see. So that's what, that's what Semler Scientific does.

Yeah. And then are there other products or, you know, that's the main one?

That's the, that's been the main one. It's, it, it's, it was a very-- It's been a very successful product. you know, at one point our stock was, had a valuation of over a billion dollars just based on the success of this product. but we have another, another application, a much bigger one actually for heart, heart disea- heart disease, heart dysfunction, it's called, it's with the FDA awaiting approval. And the-- this would, you'd use the same device, slightly different way, a, a tweak to the software, and it could, it could also help in the, screening for, of, Of people with, asymptomatic heart disease. So that's a, it's a potentially very big universe of people. we're also-- we mentioned this on our last earnings call, but we are, also finding other, potential products. We're in the early stages of, of, of, of doing some really interesting things that, hopeful-- hopefully we'll, be able to tell you more about soon. But, we're seeing some good green shoots and, in, in, in another area that we've been, developing

Great. Okay, well, yeah, look, I'd love to hear a little bit about your Bitcoin story as well, in terms of how you came across this idea, and, yeah, if you could explain a little bit from that. Yeah, let's just start with how you came across this idea. what was your first impression of Bitcoin?

You know, I, I first was exposed to it in, like 2013, I would say, I was on an investor trip. My background is, most of my career I've been a investor in technology and media and public companies, and I was, visiting Wences Casares, his, his office in Palo Alto back in twenty thirteen. I didn't know who he was, and I don't think any of the other investors on the trip knew who he was, and he, he told us the story, and it was, it was convincing, but still not something that I, kind of delved into too much because my focus was being a public, you know, investing in public companies. But I always wanted- wanted to know what was coming down the pipe, and Bitcoin sounded interesting, but not something that I jumped into. I wish I had, but, you know, it wasn't, it wasn't really my focus. I was really in my fund, I really just focused on public companies. a few years later, I'd say 2017, I, I decided to buy my first Bitcoin. I, I think I was influenced a lot by Tom Lee, who's a close friend of mine. He's, runs Funstrat, phenomenal analyst, in, in, in, in areas that I follow. And I'm on the board of Funstrat, so, you know, I, I, he and I have a really long relationship, and I, you know, value Tom's advice. And he was very early in it, in And, I also have a friend in the venture capital business named Jim Robinson, and he runs an, f-fund called RRE. He's been very successful, he's a really early investor in crypto, and he was also somebody who was very influential to me. And so as a result of, of guys like that and just talking to him, I slowly evolved into, to believing in Bitcoin, and I've always been kind of a, an outside-the-box contrarian investor, and so it kind of fit into my framework of thinking, and, It's been a, a relatively evolutionary process for me. I'd say that the, the clincher really wasn't that long ago, it was, it was with the institutionalization of Bitcoin and, just seeing how it was being adopted and kind of cemented as a, as a potential store of value, and, and that appealed to me. and, and I, I like most people who become enamored with Bitcoin, you know, once, once, once you're over the hump, it's, it, you, you just get more and more into it. Really dive in. Yeah. So I guess

would you say fair to say from, let's say twenty seventeen, twenty se- twenty eighteen, in that sort of era with Tom Lee, you sort of personally were convicted in Bitcoin or personally had a conviction about where Bitcoin was going, but at the company level, that was a later story. So can you explain maybe the difference Yeah,

let me clarify that because, most of my career I've just been an investor in public companies, and Semler Scientific was not something I was very focused on or involved in. It's a healthcare business, that's not something I invested in. I-- it was a passive investment for me about two years ago, The, the company was facing some headwinds regulatorily with the PAD, product, and so I decided to get involved. I, became an activist really in the company, ironically. My father wasn't longer involved, but I decided that, I should play a more active role in the business and trying to, fix it and, and set it, on a, on a better path. And, and I had done that, in my, my career previously with, other companies that got on public- Public company boards and tried to effect change and maximize shareholder value when I have investments in things that weren't working very well, and I, and I kind of threw up my hands and just said, "If they can't fix it, I gotta get involved." And so that was one of these situations. So I'm relatively new to Semler Scientific, I just got involved two years ago, went on the board, re-reconstituted the board, it's now myself and one of the other large investors, Will Chang, who's been a long time investor in the company, Doug Murphy has a large position, and the three of us, own over thirty percent of the company, or we did when we first, when I first got involved. It's, it's been diluted by our ATM process a little bit, but, but we still have a significant, shareholder, you know, position in, in the company. So that's, that's how I, that's how I got involved and, and, and, and, and when I, when I first went on the board, I was just, I, I was just thinking two things, you know, should we buy back stock or should we buy another company in the medical business? And, and we had, we had, our stock had traded to a level where half of our market cap, not quite half, but almost, was in- Cash. And that kind of, that kind of has a, a similarity to MicroStrategy or strategy in August of twenty twenty. You know, there's a kind of a parallel there. And, I wasn't really aware of that. I was just focused on, "We gotta find something to buy with a great return, or we gotta buy back stock." Buy back stock didn't make that much sense because our stock didn't trade very well. We weren't getting any credit for our cash, and, it didn't really make a lot of sense. So it, it It was pretty, you know, unclear whether that was a great thing to do, and, and there seemed to be more optionality using our cash to buy another company. We, we prob- I can't, we looked at dozens of companies, we got very serious with a lot of them, just everything was kind of a black box. It was really hard to get, you know, real conviction in any of that. And while this was happening, I was like a lot of people listening to Michael Saylor talk about this Bitcoin treasury strategy, I felt Frankly, didn't understand how sophisticated the financial engineering around it was. I just thought it was amazing that he was taking his cash to buy Bitcoin and how well Bitcoin was doing, and that was really interesting to me. And I think I was also scratching my head as to, like, why hasn't anybody else tried to do this? You know, I mean, Tesla bought some Bitcoin and Block, but, you know, why, why isn't anyone pursuing this Bitcoin treasury strategy? And when he started talking about zombie companies and, and, you know, I, I knew he was talking to me, you know, he was talking to our board. We were, we were a classic zombie company, and he was saying there are thousands of these, and being a, you know, public market investor who happened to, I ha-- I happened to be interested in these companies because I like to invest in things that are kind of contrarian or underfollowed, and so I knew a lot about these zombie companies, like I, I was investing in some of them. them and they were frustrating as hell to own these stocks, and we were one of them, and so it had a particularly strong hit a chord for me, and, and so I, I reached out to him through Tom Lee, and he was incredibly helpful and, great, great mentor through this process, and super excited that we were doing it, which shows you the kind of, kind of the altruistic type of person he is, especially for Bitcoin. And, and Michael, really became a, a, a A great, proponent and cheerleader of what we were doing. And so I went to our board and I had said, "You know, guys, gotta listen to Michael Sailor. You know, you gotta listen to these podcasts. Let me know what you think." They didn't have a lot of-- I don't think they had a lot of experience, you know, in, invested in Bitcoin and didn't have a full understanding of it, but I think they had this kind of open-mindedness that you need that most boards probably don't have, and they were willing to kind of consider it Or with our cash and, you know, no acquisitions out there. And so, you know, they, they surprised me frankly and said, "Hey, Eric, I think this is a great idea. Let's, let's pursue it." And I was like, "Wow, okay." So we, so we, so we decided to, to, to pursue the Bitcoin Treasury strategy back in May of twenty, la-- last May '24. So it's been about nine, ten months since we started doing this. it wasn't as easy as I thought in terms of just onboarding, you know, there's a lot of legal accounting You know, there's just a lot of paperwork and bureaucracy you kinda gotta deal with. Then the SEC at that time was, you know, not the easiest to convince to let us go do this. So there was a lot of back and forth with the SEC, a lot of questions about why we were doing this, and, and, and they kinda made it, they prolonged that kinda approval process. So it took us a little while to get out there and to, to, you know, to, to buy Bitcoin. As soon as we bought Bitcoin, it went down about twenty-five percent We had to, to buy Bitcoin, we had to cash out our balance sheet at that time, and then it, it, it kind of plunged twenty-five percent. Which, you know, if, if, if you're new to this strategy yet, and, and, and you've got board members who've never done, you know, who haven't been following Bitcoin that closely, you, you wonder, you know, you, you start to wonder like, how are they gonna react? And it was amazing, they, they just wanted to buy more. Their conviction was tested, mine was too, and Then, then we got up to, our, our Bitcoin was valued at over three hundred million until this recent drawdown, but we have a, we have about, we have, almost thirty-two hundred Bitcoin, thirty-one hundred and ninety-two. And, we're actually the tenth largest corporate holder of Bitcoin, which is, proud of that. we're the largest, obviously the largest healthcare, we're, we're the only healthcare, oriented business that has a treasury reserve strategy, a Bitcoin treasury reserve strategy. Yeah. So

I guess I'm curious then, when you were going through that big, you know, that drawdown, now, as you mentioned before, you had been in, in the personal sense, in Bitcoin. So I guess you'd already kind of been through at least a little, you know, you'd been through a couple of these big drawdown cycles. Yeah. and so I guess on your side, you were probably okay, right? But what was it like trying to talk to you, counterparts on the board or other, you know, relevant stakeholders in the business.

first of all, our stakeholders, like our shareholders, were very supportive in a way. I think our shareholder base turned over pretty quickly and became mostly Bitcoin-focused investors, and so we got very little pushback there. the, the board members, the other board members, just were amazing. They, they really weren't, weren't pointing fingers, weren't not you know, questioning what we were doing, we all were, were, we were all in just wanting to own more Bitcoin, and part of that was to get this ATM strategy, going, you know, where we would sell shares. And that, and that I referred to earlier, the bit-- the, the SEC just made that a much longer process than it needed to be. So, you know, as Bitcoin was falling, we're just sitting there waiting for the SEC to get back to us, and, and they just dragged their feet, which was, was- Was really frustrating, but once we got that, we, you know, we got back in there right away and we, we were able to buy several, you know, several hundred million of Bitcoin, which was, you know, just all along the boards, boards has just gotten like, like myself, you know, once you personally, kind of, adopt the Bitcoin standard, you know, our, our board is, is all in and they just wanna own more and more Bitcoin.

Yeah, and I also find it interesting how the strategy evolved over time, right? Because when Michael Sailor first came out with this strategy, it was just more like buy Bitcoin with your Cash, right? It wasn't this kind of strategy. It's evolved obviously over time, and it's become more about, oh, okay, actually, these public companies, they have access to equity financing and debt financing options That normal people and private companies don't have. And so then this kind of idea of equity ATM issuing shares to buy Bitcoin, this kind of strategy, you know, came up, and so- Can you talk us through that kind of that shift for you, like going from just thinking, okay, I'm just gonna buy Bitcoin with the cash we have, with our free cash flow or just the cash on hand that we have, versus I'm actually gonna start doing the more quote-unquote financial engineering or this kind of equity ATM or issuing debt to buy Bitcoin?

Right. you know, my background is, is in finance and investing, so I saw the logic in the latter strategy in trying to, you know, borrow money to buy Bitcoin to increase our returns and to own more Bitcoin. At the end of the day, the financial engineering strategy is interesting to me, and, but at the end of the day, my goal and our goal as a company is to own more Bitcoin and to- view it as a great investment that's gonna deliver a huge return to us, and that's first and foremost. And whether we're trading, a multiple to our Bitcoin or we're trading at the value of our Bitcoin, I'm comfortable with that because I believe so strongly in the upside of Bitcoin that I'm, I'm good with that. But I do see merit in, in, in, borrowing money to buy Bitcoin. You know, as a result of our balance sheet now, we have, a hundred million dollars of convertible debt on our Balance sheet, so we're now the most levered, play on Bitcoin, which when Bitcoin's going down, doesn't feel so great, but when Bitcoin's going up, we should outperform. We should outperform Bitcoin because of our leverage, because of the principles of finance, and so we, we're set up really well now to, to outperform Bitcoin, we hope, and to, really have, very, very high outsized returns if, if there is a, you know, If there's continued appreciation in Bitcoin, and that's just finance. So I, I don't think of that as, necessarily, you know, doing anything funny, you know, trying to take advantage of volatility, anything like that. I'm, I just, I'm just thinking, I wanna invest in Bitcoin 'cause it's a great store of value, potentially, and it's related to this thing. Yeah,

yeah. Back to the show in a moment. This show brought to you by CoinKites dot com, the creators of the best Bitcoin hardware security devices, such as the Mark IV and the new Coldcard Q. Now, we use Bitcoin hardware security devices to keep our keys offline, our private keys offline. Now, the way these work is you can do that setup, write down your twelve or twenty-four words on the, the seed word cards, and keep that secure. Now, you can use this device to interact with the Bitcoin network using software such as Sparrow Wallet, Electrum, or Specter Desktop or Nunchuk, as a few examples. Now, you have a range of Security features that you can use with these devices such as passphrase, you can use seed x or, or my favorite is multi-signature. Now, if you're starting in a basic way, just start with the device and the USB-C cable, plug it directly to the computer and use it that way, and then later improve your setup. But I believe these devices are great at helping secure your coins, especially as you start to migrate up into multi-signature security. But don't be disheartened or don't be, scared away, they are Accessible, and I think you actually do learn about Bitcoin in the process. So to get yours, go to coinkite dot com, use code Laverre to get a discount on your cold card. This episode brought to you by Galloy, they are building banking software for the Bitcoin age. So if you are with a bank, a fintech, or a startup looking to offer some kind of Bitcoin product, whether that is a Bitcoin collateralized loan, deposit accounts, or payments, Galloy can help you. Their latest product is called LANA. It is a loans management platform, and you can use Come to market quickly and offer a loans or Bitcoin collateralized lending product for your customers. Now, Galloy have a lot of experience in the space. They started with Blink Wallet in twenty twenty, and they've since grown this to become a community favorite over time, and so they have a lot of experience making things work in a secure, reliable, and scalable way. So if you need assistance coming to market quickly with a Bitcoin banking product such as lending or deposits or payments, talk to the team at Galloy. You can email them. The email Email is biz at galloy dot io or go to the website galloy dot io. And now, back to the show. So I'm curious then, I've heard as an example in the, in the case of strategy, I've heard Michael explain it like micro strategy can be viewed something like a one point five x or a two x of Bitcoin. From Semler Scientific's perspective, what would that number be, at least at current, you know, leverage ratios?

Oh, right, what is it right now as we're speaking? Or, actually, you know, we don't, we're not trading-- it depends how you value our medical business, but I don't think of us as trading it much of a premium, but, you know, if-- we can run-- I, I don't really wanna run through the numbers because I don't wanna get into what we think our, the value of our medical business is, but we have, right now, I think we have a, Close to like a, I wanna say like a three hundred and fifty, four hundred million dollar market value, okay? And we have two hundred and seventy-five million dollars worth of Bitcoin on our balance sheet. So, and we do have debt, and then you have to decide kind of what you think the medical business is worth. But I, I don't think we're trading at a, a, any kind of excessive premium to our, the value of our Bitcoin. If that's just my personal view. But, I don't, I don't, you know, it really in terms of what is the right premium, I don't know the answer to that either, and I think that's really something the market over time will decide. There's really two factors from my standpoint as to what justifies the premium. One is this, is, is the leverage on the upside. You know, if, if Bitcoin's going up and you're a levered play on Bitcoin, then you should go up more than Bitcoin. That's just my, my view. And then the other is that there's this dynamic of, public, investment, f- The ones that invest in public companies, a lot of them can only buy stocks, they can't buy the ETF, they can't buy Bitcoin. So there's a scarcity of, Bitcoin exposure opportunities for them, and we represent one of those. We're one of the largest, corporate holders of Bitcoin, like Strategy, you know, they're obviously, they dwarf us, but, but You know, there aren't that many in the US public markets. We're, we were only the second pub-- US public company to adopt Bitcoin and, as a treasury strategy. So, so there just aren't a lot of alternatives. So that might justify a premium as well. and so I'm comfortable with us trading at a premium, I just don't-- I can't tell you what the appropriate one is. I think that's the market's decision. Okay,

fair enough. And so, while we're talking about this kind of concept of the premium, as-- I The way I'm hearing people thinking about that is that you should sort of expect in Bitcoin bull markets and bear markets that it would sort of ex- you know, maybe it kind of expands in the bull cycle and then, you know, on the downside, it contracts during the bear cycle. Is that how you're seeing it also, that this kind of quote-unquote premium would be that? I think

that's fair. I think that's fair, and I think that, something you wouldn't need to consider too is that, you know, our goal is to own more Bitcoin. So as we own

To our, to our, the value of our Bitcoin could change, right? It could go down, or we could borrow more money and it could go up. You know, it's, it, it'll fluctuate, but so it's hard to say. I, I don't expect things to stay static. And so, w- you know, our goal is to own more Bitcoin, and, and to kind of keep that leverage ratio in that twenty to thirty percent range or lower. So we're not really looking to lever up beyond that, but, we would, you We, we believe in the value and the power of leverage, owning Bitcoin.

Yeah. And so when it comes to, let's say, structuring the terms, maybe if you could explain a little bit on that, because I guess when people coming from Bitcoin world or quote unquote crypto world, they might be thinking, "Oh, what about getting liquidated, right? " Because their, their mental model of it is like, "Oh, go onto one of the cas- the, the casinos, let's say, and leave a long or leave a short, and you can get wrecked

Bitcoin Treasury company level, the public company level, my understanding is it's more like you structure, let's say, a note, and it might be a five year note or something like this, and it's not necessarily a liquidation, it's more like, "This is the amount you have to repay in five years time or whatever." Can you just explain a little bit of That aspect of structuring the, the debt?

Sure. Yeah, that was really an important factor for us when we did our convertible in January. we raised a hundred million dollars and we structured it so that it would be five and a half years, maturity, so we don't have any obligation to pay back, the convertible, notes until twenty thirty, and, and so we, we, we're only gonna raise debt in if it's, kind of long term and durable debt, so we-- there's no put. Sometimes these convertible, offerings have a put in, in a few years, let's say, before the term, before maturity, where the investors can put the notes back to you. We don't have that feature in ours. So we borrowed, we, we, we, we, We raised a hundred million dollars in the convert market, we used a cap call which enabled us to have a much higher premium, so the, the debt doesn't convert, in, into stock until the stock appreciates more than seventy percent from, I think we were in like this, you know, low sixties when we did the deal, so there's pretty significant, room for our, our stock to go, you know, go up before they can convert. But the key thing was the durability and the maturity, length of maturity, I think that's super important, and so that gives us a lot of time, helps us go through another cycle in Bitcoin and, you know, I think that, we're really comfortable with that, there's no gun to our head, you know, anytime soon. Yeah.

and I think the other question people might have with the-- with these Bitcoin treasury companies is they might think, "Well, could this become a really crowded market? You know, and could that be bad for Bitcoin treasury companies?" Or, but I mean, to your point, maybe it's obviously very good to be first, right? Or early, right? It's very good to be MicroStrategy or Semler Scientific because you guys were kind of some of the first cabs off the rank per se. But I'm curious, what's your view on that? Now, do you think lots of companies should be doing this or only, there's only room for a certain number of companies to actually profitably do this?

Yeah, I actually think, eventually a lot of companies will do it, and I hope they do. I think it's the responsible thing to do. I, I really believe that, especially with these zombie companies, it's a, it's a fantastic way for them to max, maximize shareholder return. So I, I'm hopeful that they will. I'm, I'm more of a, a believer like Michael Saylor that, you know, all these, all these Bitcoin treasury strategy companies will, will lift the value of Bitcoin and will get people focused institutionally on Bitcoin as this fantastic potential store of value and investment, and I just think that that is inevitable. I don't, I, I don't feel that optimistic about it short term, or medium term because, it's just very difficult for boards to do this. You, you really need, a specific kind of board That where control is very concentrated or and ownership is concentrated, where, you know, you can have, someone who really strongly believes in Bitcoin kind of lead the charge the way I did, it's similar scientifically the way Michael did. And, you know, strategy. So I think you, you kind of need that internally. It's very difficult to do when you have a large board and a lot of people, you know, are just are there really to, to maintain the status quo and collect their, you know, their board check? So I, I'm not that optimistic, and that's why, you know, I've been spending a lot of my time, looking at zombie companies, to, to, to, that should potentially, and calling them out frankly on my ex account, you know, why they should be buying Bitcoin with their cash, companies with a lot of cash that are profitable, that are not growing, haven't performed well in the market market, but have this enormous cash hoard and are generating more cash and should really consider, you know, buying Bitcoin and adopting a Bitcoin treasury strategy. Yeah.

So let's talk about zombie companies then. So let's just start with the obvious question, just for, you know, listeners who may not know, what is a zombie company?

You know, a zombie company is-- I, I don't know if Michael Saylor coined the term, but he certainly popularized it. And it's, there are these companies, there's, there's a lot of 'em in the market. They tend to be small and mid-cap in size, where they haven't gotten, they haven't performed well in the market over long periods of time, and, they have, tended to be companies with, you know, with, with really anemic growth, maybe in, in some, in some cases maybe flatlined, but they have a huge cash balance, and they, and they have, and they are generating cash. So, so it's basically, companies that have underperformed, they're unloved by the market, companies with depressed valuations, companies with a lot of cash on their balance sheet, and companies that are generating cash And, and those are-- that's how I think about a zombie company. they tend to be smaller because, the, you know, smaller companies generally attract fewer investors. Companies that aren't growing tend to attract fewer investors, and, companies that aren't maximizing their balance sheets tend to be not, you know, un-unless there are activists who can come in and change the story, they tend to not do well either, and- especially companies with a lot of cash that are controlled by, by, you know, shareholder or founder and so forth, they, they, those are kind of off limits to activist investors. So you, you see companies like that that are just like, you're like, what is going on here? And the one that I initially focused on was Zoom Communications, because ticker ZM, because, Because this is a big company, I mean, they have a twenty-five billion dollar enterprise value and they have about eight billion dollars in net cash, and they generate, you know, like two billion dollars of free cash flow, of free cash flow. So like it's, it's, it's just shocking. And they, they buy back stock, but not that much, and it hasn't really been that accretive for them to do that, and, and so they should very seriously consider, you know, something much more accretive like a bi On their balance sheet, the company's growing low single digits, it's, doesn't seem, it's been throwing a lot of spaghetti at the wall trying to figure out, you know, how they can restart growth, and it doesn't, there's nothing on the horizon that looks like it's gonna improve things. Obviously, Zoom's a great brand, it's well known, we're, you know, all of us use Zoom, but it's got a lot of competition now, and it's, and it's kind of s-stuck in a rut. So that's Large cap stock that, really should pursue this. it's controlled by its founder, Eric Wan, who is a very savvy technology guy. Obviously, he created Zoom, which is, you know, phenomenal, a phenomenal success story. But he, he controls the keys to the company. You, as an activist, you can't really, force him to do anything, but you can call it out, you can, kind of make him more aware of the potential, value Of doing this. And, I believe on X, he actually started following some of this, this, this, chatter about it and some of the commentary, which was interesting in itself. But it, on the flip side, because he controls it and because he has so much influence over the company, he personally, if he could become, you know, enamored with Bitcoin and decide maybe he, you know, maybe this, it does make a lot of sense for my company. So even though you can't force him to do it, Maybe he could come around to it on his own if enough people kind of, explain it to him. Maybe the orange pill, and maybe he's already orange-pilled, maybe he just doesn't believe that it's the right thing to do for his company. But, you know, there are p-- there are companies out there like his where there's, you know, there's a lot of concentrated ownership and control and a lot of cash on the balance sheet, and, and they-- these companies are ripe for, you know, a BTC treasury strategy.

Yeah, and I think it's a great I, I think it's quite likely that there are, at least in the tech world, I'm sure there are tech CEOs and senior people in the tech world who personally hold Bitcoin, but maybe they just don't think it's right for the company, right? Like big screaming example is Mark Zuckerberg, right? Apparently he's named one of his goats Bitcoin, right? And he has a very high- Yeah. I believe, voting, because, because of like the special share type that he has, he actually does have a decent amount of control over Facebook or Meta, but he might be a rare exception in terms of having that level of control at like this size of a company. Yeah,

I think, like it'll be interesting. It wouldn't surprise me if, if, if some of, he used some of Meta's cash to buy Bitcoin just the way Elon Musk did at Tesla, and I think that would be super positive and great and maybe spur others to kind of do the same thing, and that would be great 'cause then there'd just be more demand for Bitcoin, and it would also just, Would, would make kind of mainstream traditional investors think, "Oh, this is kind of, you know, okay, like for companies to do this, "and then other companies, you know, may, may follow. So he could really, he could jumpstart it, somebody like that. And I think, I think that will happen. Adopting Bitcoin as the primary treasury reserve, that's a, you know, that's a whole nother kind of leap.

And

I don't know, you know, how likely that would be, but, you know, you do it in small steps, Hopefully, bigger companies will continue, you know, will keep, will, will jump into the game.

So my question to you would be, if you are talking to a zombie company CEO or large shareholder, would you advise them to only buy Bitcoin and just, you know, do the kind of the first step, or would you actually tell them, no, go all the way, you should actually do equity ADM, you should issue debt, you should, you know, go, go the full nine yards or whatever the saying is. How would you advise them on that?

It's a good question. I, I think, I think just getting them to buy Bitcoin is a great first step. I don't think they necessarily have to be, that all in if they don't wanna be. I think it, I think my guess is that once they buy a little bit, they'll buy more, and they'll, they'll, they'll see the, the merit in doing it. So I'd rather see them just get their feet wet if that's our only option. I, I, I actually s-- I spend a lot of my time meeting with, with public

All the time, as part of my, as part of running my family office, I meet with, with public companies and CEOs and CFOs, and, I will, when I, when I see companies that do have this kind of opportunity, they're sitting on a lot of cash and their stocks have underperformed, I will all often ask them, "What do you think about buying Bitcoin?" And so I have a pretty good antenna into this, and I have to say, that's partly why I'm a bit cynical, 'cause most of the time they just laugh at me. Right. Fairly. You gotta be kidding me. Yeah. And so when, when you have these periods where Bitcoin, you know, we're going through this Bitcoin drawdown now, I think it dropped, from, the highs to the lows today, you know, over the last few days, I think it's like twenty-eight percent from, you know, its peak So, I think when they, when they see that, they laugh a little even harder at me, you know, when I-- I'm, I'm going to a conference next week, I'm gonna be meeting with, you know, dozens of company, public companies, and, I'm, I'm sure that, you know, in this kind of environment, they'll, they'll just wanna say, you know, I told you so.

The lead sponsor of this show is Bold, the best place to buy, sell, and save Bitcoin. For listeners in the US, Bold lets you secure your financial future with complete peace of mind by integrating a low fee Bitcoin only brokerage with next gen multisig vaults. With Bold, you can smash buy Bitcoin or set a DCA plan for only zero point nine nine percent fees and seamlessly deposit the Bitcoin direct to your Bold vault. The Bold vault is a two or three collaborative multisig where you hold two keys and Bold holds one as a redundant key. Backup, protecting against loss or theft. You can use Trezor, Ledger or cold card hardware wallets to spin up a Bold Vault in just a few minutes, and the Bold Vault is the only collaborative custody vault available with zero monthly fees. They're also offering zero fees on your first ten thousand dollars of Bitcoin buys and twenty-five dollars of free Bitcoin when you buy a hundred dollars of Bitcoin or more. Try Bold today and upgrade your stacking experience over at getbold dot io. And now back to the show. Yeah. also I'm curious, is it I'm thinking now of, you know, the Trump and Vance and Zelensky, video viral that was going around and that was kind of much made of, "Oh, he's disrespecting them." I'm curious on the question of zombie companies, is it, is it taken as an insult if you say, "Hey, you're a zombie company," right? Like, is it kind of like, "You have lost your mojo and you can't do anything better with the capital, so just give up and just buy Bitcoin." Is that, is it, is it seen as It's hard to move them on that. Yeah,

yeah, I think you gotta avoid calling them a zombie company to their faces. So, maybe you started the wrong way, but I think it's difficult because it's kind of an indictment of, of their board and their strategy and, you know, and they, and they're obviously- Fighting to, to, to what they, to do the right thing, what they think it can increase the value of their company. And so they, they would be insulted by that label. Nobody wants that label. I don't mind having that label because, you know, I, I came into the company as an activist and recognized that, you know, our performance was, was not acceptable and that we need to do something about it, and we need to find an alternative path. And, it's very hard For a CEO who's often on the board to admit that because in some cases that CEO is gonna get fired, you know, if- Right. Because they say, "Hey, you're

underperforming, you should have done better,"

right? Yeah, so nobody wants to admit they're wrong. You

know, and so it is kind of an identity thing. And look, I think this hap-- we-- as I'm sure you and I have seen examples of people, even, even at the personal level, it's hard for people to just admit they were wrong and say, "Ah, yeah, actually, I should have just bought Bitcoin, right? I should have, you know, when you told me years ago to sell this property and just buy Bitcoin, and now, you know, if they listened five years later, ten years later, they would be so much better off, et cetera

Be doing it more than they, you know, this should be happening more frequently than ever because Bitcoin has sold off a lot, and this is a great opportunity. The irony of that is this is probably, kind of reinforcing to them that, "Oh, see how volatile is? See how much money we could have lost if we had done this. I'm so glad we didn't listen to you, Eric." Right. You know?

Yeah. And,

and so that's, that, that, that's the irony. It's always irony of investing. You always, you know, you

Well, that's not human nature, right? Psychologically, people can't take those type of drawdowns, and it's, you know, that people are generally risk-averse. And, and that's a, you know, that, that quote about, you know, people over, overestimate risk and underestimate opportunity. I mean, that's exactly where we are right now for Bitcoin treasury. I think their, their, corporate boards are overestimating risk and underestimating opportunity at a moment where Bitcoin has had a, relatively large- Drawdown for them, maybe not for Bitcoiners, but for, for most people, the drawdown from, its peak is, is significant, and it's probably turning these corporate boards off to Bitcoin when it should be turning them on. Yeah. And that's just, that's human nature.

One other question, I guess, putting aside kind of the first two ideas like we mentioned, in terms of just buy Bitcoin with your cash and, you know, issue equity ATM and issue debt to buy Bitcoin On the other side, and, and I understand maybe you're relatively early at the company level doing Bitcoin strategy, or doing a Bitcoin strategy, but when should a company actually deploy Bitcoin in the business, like try to, to finance a new venture or expansion or a product or to acquire a competitor or these kinds of- How, how do you think about that question?

It's a good question. we're really just focused on accumulating Bitcoin 'cause we view it as like an investment. We don't really view it as, you know, something that we should create an operating business out of. We wanna stay in our lane and focus on, on medical and, you know, the-- we have to have working capital in dollars to, to make that work, just the way the world is today. You know, our largest customers are not- going to probably accept Bitcoin, yeah. Yeah. And so, you know, or, or, or, and, and then our vendors and so forth. So I, it's probably not something that we realistically can. And, and, and by the way, I guess- I guess I don't wanna let go of any Bitcoin, right? Like, we have Bitcoin. Right. I just, I just wanna have more of it. Like, I, I don't wanna let it go. Like, I don't wanna, I don't wanna have to use it in the business. And we're in a fortunate spot, our company doesn't require a lot of capital. We're very capital light. We, all of our growth has been organic, and we can, like we're, like I mentioned earlier, we're starting to, to, get into some Investment to do that for us. So most stuff we can do is organic, and when, when we, when we're successful with a product, we generate very high margins and, and generate cash flow, which is great, 'cause it just feeds into this, ability to, you know, to buy more Bitcoin at a very high yield. so I, I, I think that kind of like where we're at. The question about maybe buying a zombie company is interesting, maybe I, I've heard of, I, I know there are people out there who are looking To do that, to, to, to be activists in zombie companies and, and, and force them to do a Bitcoin treasury strategy, that's really appealing to me. I, I don't know if that's something that Semler, we need to do or, or, or we're not looking at doing anything like that. But there's, there's some, there's some real, I think that could be a really interesting kind of opportunity for people with capital in, you know, institutions with capital to, to kind of, convert these zombie companies into BTC companies Companies, you know, by, by being kind of, acquirers. Yeah.

Now, part of why when, once you're like really into Bitcoin, you just wanna keep accumulating Bitcoin, part of it is the effective hurdle rate as a Bitcoiner is so high, right? Depending on your projections in the, what you think the future is gonna be, like if you're looking at whatever power law or whatever, whatever other thing, and okay, yeah, I think even Even with diminishing returns over the next ten years, like I think it's quite reasonable that in ten years, Bitcoin could ten x in that time, and then as, either as an investor or, you know, if you're managing a company That is gonna impose a very strict, I guess, environment for you because now it's like anything other than Bitcoin is just, isn't gonna meet that bar. So how do you think about this question of Bitcoin as the hurdle rate?

I, I think you're absolutely right. I think the hurdle rate on Bitcoin is so high. I think of it as like sixty percent. So I, I think that, that just makes it almost impossible for us to find anything, to buy, especially in like in the medical area. I mean, if you could buy- Cash, you know, for free, you know, if you could buy a public company that's trading at a huge, you know, discount and take their cash and buy Bitcoin, that's difficult to do. There's a lot of hurdles to that, you know, with just being, you know, a public company and having to pay a large premium and fighting, you know, the board and so forth, so it's, it's, it's messy and, and, and you're probably better off just buying more Bitcoin and staying, you know, independent. and, and the only way you could do that is with your stock, you know, you wouldn't wanna use your cash To do that, because you'd rather put your money into Bitcoin. There's too much uncertainty, like if you tried that strategy of acquiring something or, yeah, you know, you wouldn't know You wouldn't have as clear a picture or visibility into whether you're gonna get, you're gonna exceed that hurdle rate that Bitcoin offers, so you're better off just sticking with, you know, with, with Bitcoin And there are, there are companies in the stock market that will outperform Bitcoin. It, there are, there, it is possible. Like, I mean, you know, we've, we've had some ten xers just in a year in, in some of these tech stocks, you know, companies like AppLovin' and, you know, there, there, there have been incredible, Nvidia, you know, there have been some incredible performances, and, and obviously strategies kind of exceeded most of those, but it's, it's, it's still there are opportunities. It's just It's just so hard to know, it's like thrown at a dartboard a little bit, and I'd much rather, I have just much more certainty and, feeling of, Visibility with Bitcoin, ironically, you know, 'cause it's not something that generates cash flows, it's not like a your typical company, it's a commodity, and, yet it has this, you know, I-- it's so clear to me from this, especially as it, as it compares to gold and the value of gold and that disparity is increasing, the disparity in value between gold and Bitcoin, and so, I think that that, that just makes the upside even more exciting, and I just think as the years go by and our- Our world just becomes more digitized. The, the concept of owning gold versus Bitcoin, is just like, it just becomes even more obvious, especially younger generations, when they, like, "Why would I own this physical, you know?" asset and gold when I could own a, an immutable, you know, digital asset like Bitcoin.

Yeah, and I think it's also fair to say that because we're so early in Bitcoin today, and yes, I know it sounds crazy saying that even sixteen years in, but yes, we are still early in terms of global adoption, Maybe it changes over time, right? Like ten, twenty years down the line, maybe by then we've sort of seen the tapering down, the diminishing returns, and then at that point, now it might make more sense to actually do other things than just hodling and just buying more Bitcoin. Yeah,

yeah. Perhaps. Yeah. I think it's so far away from-- we're so far away from being there, it really feels so early to me that, I'm just thrilled that we have this opportunity and that we saw it, we didn't see it as- Early as, as a lot of people, but we, we feel like, you know, there's just so much upside and that we're on the right path, and, you know, it, it, even though we were early, we, we, we feel like, you know, we're just, we're just gonna, we're gonna, we're gonna eventually be so thrilled that we pursued this strategy.

So I've got a couple other questions. So one other idea, w- I, we sort of touched on this a little bit, but around saturation, right? The how, the crowded market point that- Okay, yes, right now there's not that many Bitcoin tre- treasury companies, so maybe when you go to market with a convertible debt offering or you, you, you, you've got a decent number of buyers of that, Do you think that changes over time, that like if there were to be thirty Bitcoin treasury companies or a hundred Bitcoin treasury companies, do you think there would be sort of a saturation point at that point or is, it's no, no, actually we're still really early? Like, how are you thinking about that?

You know that, that's the, that, that is the capital markets. It ebbs and flows, right? It's like something gets hot and then everybody plows in and then they, they- They flood the market with these offerings and not all of them go well, and then it shuts down. That's cyclical, that's capital market stuff. It's not really so much whether it's Bitcoin or, you know, AI or, or Or, or steal. I mean, it, it doesn't really matter. So like last fall, the convertible market was super hot, especially for Bitcoin companies, because Strategy had been so successful and he, Michael Saylor had transformed, you know, wealth and fortune for convertible market investors. He, he had created so much success for people that invested in his converts that it made it easier for others to follow in his footsteps. So you saw a lot of Bitcoin miners going into- To the convert market, raising capital at very, a very, low cost of capital, and, you know, it just got to the point where, you know, there was one like every day, and then, you know All of a sudden, a few of them don't work out or some of them come right back to the market after being there, you know, a few weeks earlier, and, and, and, and, and you've just, you know, you've oversupplied the market and then it doesn't, do as well, and so demand, you know, subsides. And so you gotta wait for that to kind of flush itself out. And so that's just capital markets, but yeah, there will be a time when there's all these Bitcoin treasury companies, hopefully sooner rather than later, and they will go to the convert markets, and I think the convert markets will be more discerning. Like they won't just, "Oh, your Bitcoin treasury strategy? Yeah, here's a hundred million dollars." No, I think it's gonna be, "Well, what is, what is your differentiation?" "Okay, Semler Scientific, they've got a two-pronged strategy It generates a lot of cash flow to buy Bitcoin, and they have this Bitcoin treasury strategy. They have some great products in the medical world, and they also have a Bitcoin treasury strategy. I like that story. I'm gonna, you know, I, I, and I like their balance sheet, and so I'm going to prefer to, to invest in that one, just the way you would with, you know, a, all types of companies that go to market, you know, that you have to have a story. And if the story is bland and, and, and redundant, you have a, Raising capital, so you have to stay differentiated, and the way we're gonna stay differentiated is by hopefully having a good two-pronged story and, and then having the right kind of capital structure to benefit from the rise of Bitcoin.

Yeah, and so I'm also curious if you could explain a little bit in terms of who the typical customer or investor is. you were touching on this a little bit before where there are some kinds of investors who maybe they have a mandate and they can't just buy Bitcoin themselves, so they have to use- One of these options, either buying public equity or buying debt, because maybe that's their mandate. So could you explain a little bit about who-- I mean, obviously without, if you're not able to share, but in, in terms of the type of, entities who are able to-- who are interested in buying this?

So these are the biggest entities. these are big mutual funds, right? These are, I, I won't name names, but they're, they're household names in for, for people that, have, you know, that are in mutual funds. They're the largest mutual funds. they're the largest asset management companies, and they have mandates, a lot of them, I think most of them to, to, to, if it's a stock fund, they can only own stocks, they can only own certain types of stocks and some of them, right? It could be an international fund, it could be an income fund, it could be a growth fund. So, but, but a-l- these funds have very prescribed rules about What they can invest in, and they run, you know, trillions of dollars of capital, and so that, that there's just a huge pool of, kind of mainstream, investment funds that, that can't buy the ETF, they can't buy-- they can't buy any ETFs, they can't buy spot Bitcoin. So, you know, that there's, there's a tremendous potential of money on the sidelines, institutional money on the sidelines for Bitcoin treasury. Strategy companies. We've, we've, we've done calls with some of them, and we happen to have, we have, I think right now we have two of them as investors in our fund. Capital Research is an investor in our fund. and Sesquihana is an investor in our fund, but-- and that's publicly revealed, that's why I mentioned their names. But, the-- there, there's, there's, there's not just-- just because they can't, they can invest in Bitcoin doesn't mean they want to invest in Bitcoin. Yeah, they, they, they, they, they, they-- you have to convince them that Bitcoin makes sense. And there's still just a, a dearth of people at these funds that, you know, want exposure to Bitcoin. There's-- it You know, it's still the exception to the rule, so you really have to find, outside the box thinkers at mutual funds, you know, who run these portfolios to, to, to want to do this. And it's, it's happening much more slowly than you would expect. And I, I think just as a, as an aside, I, I think that the, we- Where, you know, this, this latest drawdown and this, there's been a lot of tourist money in Bitcoin, right? There's been a lot of people that, you know, kind of have hopped on the bandwagon with the red wave, and when it-- and these are people that are generally much more risk-averse than people that have been in Bitcoin for a while and aren't ex-- you know, used to these types of drawdowns. And so they're, I, I feel like a lot of them are getting shaken out now, like, and I think that it just makes Making that case for investing in Bitcoin harder because you've had kind of this unwind of momentum across the board in the stock market and Bitcoin's been swept up in that and, and, and so I think that the whole allure, Of the red wave, move in Bitcoin has b-is kind of, that's kind of what's happening now, is you're seeing an, an unwind, and that's, that's good, it's cathartic, it, it kind of shakes out the weak hands, and then eventually, you know, you can go back to having, you know, More ownership, I hope, you know, by people that have higher conviction in Bitcoin.

Yeah, and I think as you said, sometimes we get-- I mean, and this happens every cycle, right? Like new people who are coming in, they're not as comfortable, they're not as used to dealing with the drawdown, and so now a big drawdown hits and people kind of run off or, you know, but I think it will be interesting to see what happens as more and more of these Bitcoin treasury companies like yours that do this strategy and then- And start to show results, right? Like Michael was out there showing, "Look how strategy has done versus S&P 500 or against the Mag7 or against Bitcoin itself, because it's levered." and so once you-- you know, as you started in what May 2024, so once you hit your first year or once you start having like earnings calls and showing, "Okay, here's where we were then and here's where we are now," then that will start to sort of prove it out, and I guess it'll take away the career risk for But if you have any thoughts on, you know, buying through the bear cycle as well, because, you know, Michael was doing that, and I presume you'll, you'll be doing that, can you talk a little bit about that?

Sure. Yeah, I, I think that we, expect that, right? We expect a bear cycle. I, I think we've, we've had these little, these mini drydowns, you know, back in last summer we had a, a one that I think was close to thirty percent, twenty-five percent. This one's close to thirty, and, maybe they're nothing compared to what, you know, we're gonna see in the bear cycle. But we want, we wanna be in a position where we can,

you We have, like, the, the debt we have is five and a half year debt, so it's, feels like I said earlier, just feels like it's not, you know, something, it's not gonna, be an issue getting through the cycle, and we hope to have a lot more Bitcoin on our balance sheet than we do now, accompanying that debt. So, we'll just, we'll just continue to buy Bitcoin as frequently as we possibly can, you know, using our operating cash flow and using other financing vehicles. and, and so I'm not-- I mean, I, I'm sure it'll be very painful and wish we had bought lower when it happens, but I don't think we can, Kind of, you know, I don't, I think we just gotta, just gotta focus on accumulating Bitcoin and not trying to time things so much. I, I do hear a lot of people saying now, because Bitcoin's more institutionalized, that the drawdowns will be less sharp. Or less significant. You know, I don't know, I, I'm not gonna assume that. We're just gonna be really smart, intelligent and prudent about, adding Bitcoin to our balance sheet, not putting ourselves in a precarious situation where, you know, our company's at risk or our shareholders are at risk. And again, you know, I'm a large shareholder of the company, so are members of our board, and we all have a lot of skin in the game, so we're not, we're not trying to do anything kind of for the- The short term pop, we're really just thinking about this in a long term way, and that's why our debt is structured that way.

Fantastic. Well, I think that's a great spot to finish up. any, I guess, any last comment you wanna make, what people should think about, I guess, you know, we've, we've been talking about zombie companies, so I guess if you had a, a final pitch for the zombie companies.

Final pitch for the zombie company is that we started on this path just nine, ten months ago, May last year. Our stock, right now has more than doubled, which is a great return. At one point, it had almost quadrupled. So, you know, I think that a, a double with Bitcoin actually down twenty-eight percent in the, in the last few weeks is, is, is, is, is, is pretty good. So if Bitcoin can recover Go up and as we expect, and we think that over time, Bitcoin will, ex-exceed the value of gold, which would put it over a million dollars, per-- you know, per Bitcoin. I think that it makes a lot of sense for others to follow in our footsteps. And, and, you know, and, and pursue this strategy will all benefit because, you know, Bitcoin's got so much upside.

Fantastic. Well, Eric, it was great chatting with you. Listeners, you can check out Eric online, semlereric at x dot com and semlerscientific dot com. Eric, thanks for joining me today.

Thank you,

Stefano.

Enjoyed it.