In the realm of medical device manufacturing, few could have anticipated Semler Scientific’s (SMLR) pivot towards Bitcoin. Founded in 2007 by Dr. Herbert Semler, a former flight surgeon in the Korean War and later a pioneering cardiologist in Portland, the company has now embarked on a groundbreaking financial strategy. Seventeen years post-establishment, Semler Scientific has converted a substantial portion of its cash reserves into Bitcoin, with plans to expand these holdings further.

Eric Semler, the company’s chairman and son of the co-founder, shared insights into this strategic shift. He described his father’s enthusiastic response to the new investment direction. Reflecting on family investment philosophies, Eric noted that his grandfather, Harry Semler, had a penchant for gold, seeing it as a timeless investment. Eric believes that his grandfather would have appreciated Bitcoin as the contemporary equivalent of gold.

At nearly 96 years old, Herbert Semler is now retired and no longer actively involved with the company. Eric himself had only been a passive investor in SMLR until he assumed a more active role in April 2023, driven by governance challenges within the firm.

Since Eric Semler’s more direct involvement, the most notable change has been the company’s decision to adopt Bitcoin as a treasury strategy, announced in May. This move mirrors the path taken by MicroStrategy (MSTR) under Michael Saylor, who famously converted his company’s cash holdings into Bitcoin, amassing nearly $14 billion worth of the cryptocurrency.

“Michael Saylor’s insights about underappreciated companies with significant cash reserves resonated with our board,” Eric Semler explained. Inspired by MicroStrategy’s success, Semler Scientific decided to study and replicate their approach.

To date, Semler Scientific has acquired 929 bitcoins, amounting to $63 million, at an average price of just under $68,000 each, as per their second-quarter earnings report. Despite a recent price decline to around $57,000, which has reduced the value of their holdings by approximately $10 million, the board remains steadfast in its conviction.

“When you believe in something deeply, you must be prepared to invest even when the market moves against you,” Eric Semler remarked. “True conviction is tested by whether you’re willing to buy more when the price drops.”

Following another strategy from the Saylor playbook, Semler Scientific has moved to raise capital to purchase more Bitcoin. The company filed a $150 million mixed shelf offering in early June and is awaiting SEC approval to proceed. Although seasoned issuers like MicroStrategy often receive quick approval, Semler Scientific, being a smaller entity and new to such capital raises, faces a lengthier approval process.

An Early Believer

Eric Semler has been a professional investor since 1998, engaging with Bitcoin entrepreneurs early in the cryptocurrency’s evolution. He began personally investing in Bitcoin in 2016, driven by a focus on future trends and an eye for small-cap stocks poised to grow into large-cap entities. Bitcoin, he believed, fit this profile. Its resilience, particularly during the 2023 collapse of Silicon Valley Bank—a lender to cryptocurrency firms—cemented his confidence in Bitcoin’s durability.

“The robustness of Bitcoin through that crisis impressed me and influenced my perspective on it,” Semler reflected.

Adopting Bitcoin as a treasury reserve, he explained, was a straightforward business decision. With ample free cash and positive annual cash flow, Semler Scientific sought to enhance shareholder value—an objective they felt Wall Street had overlooked.

“It was the culmination of extensive soul-searching about maximizing shareholder value,” Eric Semler concluded.

By integrating Bitcoin into its treasury strategy, Semler Scientific not only aligns itself with forward-thinking financial practices but also positions itself as a trailblazer in the intersection of traditional business and digital currency innovation.