MicroStrategy Shares Buying and selling at an ‘Unjustifiable Premium’ to Bitcoin: Report

Kerrisdale Capital has argued in a current report that MicroStrategy’s shares have grow to be overvalued. “We’re lengthy Bitcoin and brief shares of MicroStrategy, a proxy for Bitcoin which trades at an unjustifiable premium to the digital asset that drives its worth,” the corporate acknowledged.

MicroStrategy’s shares witnessed a notable 14% decline on Thursday following the disclosure.

Unjustifiable Premium

The agency argued that the premium at which MicroStrategy’s shares are buying and selling, representing over two and a half occasions the spot worth of Bitcoin, is unwarranted, claiming that BTC would have to be buying and selling at $177,000 to justify it.

Nonetheless, Kerrisdale Capital believes that the inflated premium on MicroStrategy’s shares will doubtless lower, providing a chance for a pair commerce.

The agency clarified that its evaluation isn’t primarily based on a bearish outlook in direction of Bitcoin or MicroStrategy individually however somewhat on the distorted relationship between them.

MicroStrategy’s software program analytics division contributes simply 3% to the corporate’s total worth, with a lot of its Bitcoin acquisitions financed by way of debt and fairness choices, diluting shareholder worth. Regardless of a rise in Bitcoin holdings, Kerrisdale asserts that the quantity of BTC per share has remained largely unchanged lately.

Whereas some argue for MicroStrategy’s premium as a result of its capacity to reinvest software program enterprise money flows, lack of administration charges, liquidity, and ease of buying and selling, Kerrisdale finds these arguments unconvincing.

MicroStrategy trades at a 2.6x fairness premium to Bitcoin, surpassing the historic common of 1.3x. Kerrisdale notes that this premium has exceeded 2x on solely 6% of buying and selling days since 2021, suggesting an overvaluation.

Distinctive Leverage and Bitcoin Improvement Focus

As soon as seen as a main route for Bitcoin funding, the increasing accessibility of cryptocurrencies by way of brokerages and low-fee funding choices has diminished its enchantment.

Saylor has beforehand expressed confidence that MicroStrategy will stay appealing to traders, highlighting its distinctive providing for these bullish on Bitcoin. He emphasised that not like ETFs, which cost charges with out offering leverage, MicroStrategy provides leverage with out charges.

He additionally just lately introduced MicroStrategy’s rebranding as a “Bitcoin growth firm,” citing the success of its BTC technique and its standing as the most important public holder of the asset. MicroStrategy presently holds 214,246 BTC, a 54% improve from the earlier yr.

Saylor spoke concerning the firm’s flexibility as an working entity to handle capital and operations, aiming to build up extra BTC for shareholders and promote the expansion of the Bitcoin community by way of software program growth and leveraging capital markets.