Coin World News Report:
MicroStrategy’s stock price rose 6% on Thursday to over $230, reaching a new high in nearly 25 years. This marks the sixth consecutive week of continuous rise for MicroStrategy, the world’s largest corporate shareholder, in Bitcoin.
Less than two months ago, MicroStrategy’s stock price was at $118 as Bitcoin was hovering around $56,000 on September 6, showing a downward trend. Since then, although the price of digital assets has risen by 20% to $67,600, MicroStrategy’s stock price has nearly doubled in comparison.
MicroStrategy has shed its label as an enterprise software company and positioned itself as a Bitcoin development company.
Earlier this month, Michael Saylor, the co-founder and CEO of MicroStrategy, stated that this effort involves becoming a “Bitcoin bank” and described it as creating “Bitcoin capital market tools that cover equities, convertible debt, fixed income, and preferred stock.” The company has also disclosed the creation of a decentralized identity protocol for Bitcoin.
The company’s treasury, which holds 252,220 Bitcoins, is currently valued at $17 billion, accounting for over 1% of the total Bitcoin supply. MicroStrategy’s game plan for acquiring Bitcoin has undergone significant changes since it first included Bitcoin in its balance sheet in 2020.
MicroStrategy has been acquiring more Bitcoin through equity and debt than any other means. This year, it involved issuing convertible notes, which can later be converted into stocks, and issuing equity through a funding program.
According to Bernstein, an asset management company, the company provides leverage exposure to Bitcoin and has rated MicroStrategy as “outperformance” in a report this week, with a target price of $290.
Bernstein analysts wrote, “We believe investors should view MicroStrategy as a positive leveraged Bitcoin stock strategy. It actively switches between equity and long-term convertible debt to provide exposure to Bitcoin while maintaining a conservative leverage ratio.”
While spot Bitcoin ETFs have seen over $20 billion, MicroStrategy had already embraced Bitcoin before launching its Bitcoin in January this year. Saylor recently stated that he believes the company serves as a bridge between traditional finance and digital assets, playing a crucial role.
He said, “If we didn’t exist, billions of dollars in capital from the traditional financial markets wouldn’t be invested in Bitcoin. The true business of MicroStrategy is to become a leading securities issuer to acquire Bitcoin.”
With the recent rebound in MicroStrategy’s stock price, its valuation relative to its Bitcoin holdings has increased, reflected as a premium to Net Asset Value (NAV). As of Thursday, this premium reached a 2.7x, the highest level since February 2021, according to reports, and the MSTR tracker.
Bernstein analysts wrote that MicroStrategy’s returns have been building a case for its premium as its stock price has risen 426% in the past year. Among the factors driving MicroStrategy’s premium, the asset management company pointed out that it has demonstrated the ability to increase its per-share Bitcoin holdings and the limited number of comparable investment tools that provide leverage exposure.
Meanwhile, MicroStrategy also has some outspoken critics, including Bitcoin skeptics and economist Peter Schiff. On Tuesday, he argued on Twitter that MicroStrategy’s valuation and the advantages of its Bitcoin strategy will eventually reverse.
“MSTR is certainly the most overvalued stock in the MSCI World Index,” he wrote. “When it finally crashes, that will be a real bloodbath.”
Editor:
Andrew Hayward