Meta Shareholders Reject Bitcoin Treasury Proposal 1,221 to 1

Meta, the social media giant, holds $72 billion in liquid assets in its reserve. However, at its annual meeting on May 28, shareholders overwhelmingly rejected a proposal to assess whether Bitcoin (BTC) could qualify as a future treasury reserve asset. The proposal was dismissed by a ratio of 1,221 to 1. This rejection is indicative of the broader skepticism that Big Tech and mainstream corporations hold towards Bitcoin, despite growing corporate adoption of the cryptocurrency.

Treasury reserves, also known as cash reserves, are held by corporations to fund short-term or emergency obligations. These are typically cash or cash equivalents like money market funds or three-month US Treasury bills. Strategy became the first publicly traded company to adopt Bitcoin as its primary treasury reserve asset in August 2020, but few major tech firms have followed suit since then.

The rejection of the Bitcoin proposal by Meta's shareholders raises questions about the institutional readiness to adopt crypto. New York University professor Aswath Damodaran, a known crypto skeptic, described the proposal as "lunacy," stating that he couldn't think of a reason why it would be a good idea. He argued that corporate treasuries are more like emergency funds and not a platform for speculative investing.

Duke University finance professor Campbell Harvey, who has written a book on decentralized finance and is generally positive about the future of blockchain technology, was also dismissive of the Bitcoin treasury initiative. He suggested that if Meta investors want to own Bitcoin, they can buy it themselves. He compared Bitcoin to a highly volatile instrument that isn’t suitable for corporate reserves, stating that stablecoins properly qualify as a treasury reserve as they are typically liquid and pegged to an underlying asset, such as the US dollar.

Harvey suggested that Strategy’s successful Bitcoin blueprint has inspired other companies to jump on the bandwagon. However, he noted that Strategy has bet the company in transforming itself into an active Bitcoin fund. He added that if a company wants to make a strategic investment in Bitcoin, just like they might make a strategic investment in a startup, he has no problem with that. However, he cautioned against calling this a treasury asset.

Despite the rejection, some argue that Meta could benefit from allocating a portion of its cash reserves to Bitcoin. David Tawil, president and co-founder of ProChain Capital, suggested that Meta would be better off putting some of its cash in Bitcoin for diversification purposes and to insulate against an inflating dollar. James Butterfill, head of research at digital asset investment firm CoinShares, noted that a 3% Bitcoin allocation can double a fund’s Sharpe ratio, a gauge used to assess risk-adjusted performance.

Meta’s shareholder vote may reflect a broader sense of caution among mainstream corporate and institutional investors when it comes to Bitcoin. However, CEO Mark Zuckerberg controls 61% of Meta’s voting power, so this isn’t necessarily a representative sample of corporate America. Stefan Padfield, executive director of the Free Enterprise Project at the National Center for Public Policy Research, noted that corporate boards and managers are likely as divided on Bitcoin as economists and politicians.

Meanwhile, some of the world’s largest asset managers have warmed to crypto. BlackRock recently recommended that investors consider putting up to 2% of their portfolio in Bitcoin for diversification. Bitcoin treasury initiatives have been ramping up globally, with at least 72 new companies adopting Bitcoin this year. However, many of these moves appear to be driven more by a desire to flatter their stock prices rather than a genuine belief in the long-term value of holding Bitcoin on the balance sheet.

Despite the rejection, some analysts suggest that it’s likely that we’ll eventually see a major large-cap company add Bitcoin to its balance sheet. However, the 1,221:1 rejection ratio by Meta shareholders was rather emphatic. Some suggest that Meta shareholders may have overreacted to Bitcoin’s so-called volatility. Butterfill noted that Bitcoin has exhibited consistently lower volatility than Meta for over two months now, and this trend holds across the FAANG stocks more broadly.