“Exceptionally High” MicroStrategy Stock Price Driven by Debt-Funded BTC Holdings, Investment Firm Says

MicroStrategy's share price, which depends primarily on its bitcoin (btc) holdings, is “exceptionally high” and “unjustifiable,” argues investment firm Kerrisdale Capital.

Investors have inflated MicroStrategy's premium as a result of the company's btc holdings. Most of this btc was purchased through debt financings, equity-linked convertible notes, and ATM stock offerings, the firm said in a March 28 analyst note. note.

Calling the company's use of leverage to buy more btc “smart” is flawed logic, he added.

bitcoin ETFs Could Make MicroStrategy Redundant

The launch of Spot bitcoin ETF (exchange-traded funds) in the US could reduce the need for investors to trade MicroStrategy shares to gain exposure to bitcoin, the company added.

Microstrategy (MSTR) no longer presents investors with “a unique and uncommon way to gain access to bitcoin,” the note said.

Kerrisdale Capital said MicroStrategy's “sleepy software analytics business” only represents 3% of the company's collective value. Other reasons arguing in favor of MSTR's value, such as the ability to purchase more btc using the software company's cash flows, its access to liquidity, lack of management fees, and how easy MSTR is to trade, are all “weak”, the added note. Therefore, the investment firm's analysts said that “they are short MicroStrategy shares.”

Michael Saylor maintains a positive outlook for the company

MicroStrategy CEO Michael Saylor has continually expressed confidence in the company's ability to remain attractive to investors. One thing that gives MicroStrategy an advantage over spot bitcoin ETFs, besides not charging fees, is the leverage it offers investors, Saylor said in a December interview with Bloomberg TV.

bitcoin?src=hash&ref_src=twsrc%5Etfw”>#bitcoin is better. pic.twitter.com/UkZR7t6UEP

—Michael Saylor (@saylor) March 28, 2024

More recently, the CEO also revealed that the company will be renamed a “bitcoin development company.” He called this a “natural decision,” in a Feb. 12 statement. bitcoin-etfs.html”>interview with CNBC, given the success of MicroStrategy's bitcoin investment.

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