Summary:
Bitcoin recently hit $90,000, marking a 1,000% increase in five years.
MicroStrategy stock has surged nearly 400% as it pivots to Bitcoin investments.
The company holds 279,420 Bitcoins, valued at approximately $25 billion.
MicroStrategy's new '42' strategy aims to raise $42 billion for further Bitcoin purchases.
Investing in MicroStrategy carries higher risks compared to buying Bitcoin directly.
Bitcoin is on the rise again, recently surpassing $90,000 to reach a new all-time high, marking an impressive 1,000% increase over the past five years. This surge is likely to delight MicroStrategy (MSTR) and its former CEO, Michael Saylor. The software company has transformed into a Bitcoin investment powerhouse, witnessing a 400% increase in its stock price as it aggressively expands its Bitcoin portfolio.
Betting Big on Bitcoin
MicroStrategy, originally a software business, generates approximately $100 million in quarterly revenue, a mere fraction compared to its $67 billion market cap. The bulk of this valuation stems from the 279,420 Bitcoins it holds, currently valued at around $25 billion. The company has financed its Bitcoin acquisitions through substantial debt, totaling $4.2 billion by the end of Q3, and by issuing new shares, which have increased by 85% in three years.
MicroStrategy's strategy is set to escalate further with its new "42" strategy, aiming to raise $21 billion through debt and an equal amount via stock offerings to significantly boost its Bitcoin holdings to $67 billion. This would position MicroStrategy as one of the largest Bitcoin investors globally, controlling about 4% of all Bitcoin in circulation.
Diverging Valuations
While MicroStrategy's Bitcoin strategy has proven successful, its market cap appears inflated. The company's net asset value (NAV) stands at approximately $21 billion, yet its market cap is over three times that amount. Investing in MicroStrategy is essentially a bet on its Bitcoin management and the appreciation of its holdings, which carries higher risks than directly purchasing Bitcoin on an exchange like Coinbase.
Should You Buy the Stock?
Despite MicroStrategy's impressive stock performance, investing in it may not be prudent. If Bitcoin continues to rise past $100,000, the stock could follow suit, but at what cost? Instead of acquiring MicroStrategy shares at inflated prices, consider investing directly in Bitcoin for a more straightforward correlation with its price movements. Betting on MicroStrategy means relying on Saylor's management while he dilutes shareholders and incurs significant debt, which introduces substantial risk.
Ultimately, if you seek exposure to Bitcoin, purchasing the cryptocurrency directly is a more sensible approach.
Comments