Semler Scientific Studied MicroStrategy’s Success Before Adopting Bitcoin Strategy

As a researcher delving into the world of finance and technology, I find myself captivated by the transformative journey of Semler Scientific under the leadership of Eric Semler. With a rich family history rooted in investment wisdom, it’s intriguing to see how Eric’s experiences have shaped his decision-making processes.

In the year 2007, approximately two years prior to Bitcoin‘s emergence, I, an analyst, find myself recounting the story of Dr. Herbert Semler, a remarkable individual with a diverse background. Prior to his role as a cardiologist at a Portland hospital, he served as a flight surgeon during the Korean War. In this year, Dr. Semler co-founded Semler Scientific (SMLR), a significant event in his professional journey.

As a researcher, I find myself reflecting on a fascinating development: seventeen years after its establishment, this medical device company has chosen to convert a significant portion of its liquid assets into Bitcoin. This strategic move hints at their ambition to further invest in this digital currency.

“Eric Semler, the company’s chairman and Herbert Semler’s son, expressed his father’s immense enthusiasm regarding this fresh investment approach. As Harry Semler, Herbert’s father and Eric’s grandfather, had found gold to be a lucrative investment in his era, he would have been thrilled to witness the company investing in what is being called ‘the new gold,’ according to Eric Semler during an interview with CoinDesk on Tuesday.”

At nearly 96 years, Herbert has now retired from Semler Scientific, no longer participating in its operations. Initially, Eric was merely a passive investor in SMLR; however, in April 2023, he increased his involvement due to corporate governance concerns at the company.

Significant transformations have occurred since Semler’s initial arrival, with perhaps the most striking being the company’s choice to integrate bitcoin into its financial strategy as a treasury tactic, an announcement made in May this year. In essence, Semler is mirroring MicroStrategy (MSTR), whose CEO, Michael Saylor, has been instrumental in converting the company’s cash reserves into bitcoin, resulting in a current holding of approximately $14 billion worth of the cryptocurrency.

Michael Saylor’s repeated warnings about financially stable but overlooked companies, which he likened to ‘zombies’, struck a chord with our board members. Consequently, we found MicroStrategy’s success intriguing and recognized the potential benefits of emulating their approach.

As an analyst, I’ve observed that Semler Scientific has acquired a total of 929 bitcoins at an average price of approximately $68,000 per coin, amounting to a total investment of $63 million, based on their Q2 earnings report. With the recent drop in Bitcoin prices to around $57,000, the value of these holdings has decreased by roughly $10 million. However, this price decline doesn’t seem to have shaken Semler’s confidence, as they’ve stated that it doesn’t alter their conviction in their Bitcoin investment.

“If you truly believe in something and are confident about it, you should be prepared to take a stand and purchase items even when they go against the general trend,” he stated. “I firmly believe that the true measure of one’s conviction is whether they would buy something that has dropped and was previously 20% more expensive.”

Drawing inspiration from Saylor’s strategy, Semler aims to secure funds through the capital markets to acquire substantial quantities of bitcoin. The company has already submitted a $150 million mixed shelf offering in early June and is now waiting for the Securities and Exchange Commission (SEC) to grant approval before proceeding.

For companies like MicroStrategy, who are experienced in such matters, regulatory approval usually comes swiftly. However, since Semler Scientific is relatively small and this is their initial foray into this type of fundraising, the process of receiving approval is taking longer than usual.

An early believer

Since 1998, Semler has been a seasoned investor. He interacted with Bitcoin pioneers at the inception of cryptocurrency and started personally investing in it in 2016. His investment strategy has always revolved around identifying trends for the future, aiming to spot stocks and businesses that could potentially grow from small-cap to large-cap companies.

In his words, Bitcoin belongs to that category, and he came to understand its resilience over time, particularly during the failure of Silicon Valley Bank in 2023 – one of three banks that fell victim to bank runs. These banks had been serving cryptocurrency companies, leading to a spike in industry uncertainty.

“The resilience of Bitcoin during that period left a strong impression on me, shaping my perspective towards it,” Semler reminisced.

As an analyst, I chose to invest our company’s reserves in Bitcoin due to a strategic business perspective. Our financial standing was robust, with ample free funds available and annual cash inflows adding to this strength – factors that, in my view, were not fully recognized by the financial market. This move was less about a Bitcoin fad and more about capitalizing on our financial health and potential returns.

“It was the result of a lot of soul searching about how to provide shareholder value,” he said.