- MicroStrategy’s stock price topped $230 on Thursday, marking a nearly 25-year-high and a peak since its Bitcoin buying spree began in 2020.
- MicroStrategy has positioned itself as a Bitcoin development company, with plans to create Bitcoin capital market instruments and a decentralized identity protocol on Bitcoin.
- While MicroStrategy’s Bitcoin holdings are currently valued at $17 billion, the company’s market capitalization has climbed from $1.5 billion to over $4 billion in just four years.
MicroStrategy‘s stock price popped 6% on Thursday to above $230, touching a nearly 25-year high as a six-week rally for the world’s largest corporate holder of Bitcoin continued. Less than two months ago, MicroStrategy shares were valued at $118, trending lower as Bitcoin hovered around $56,000 on Sept 6. While the digital asset‘s price has climbed 20% since then to $67,600, MicroStrategy’s share price has surged by comparison, nearly doubling over that period of time.
MicroStrategy’s Bitcoin Strategy
Shedding its label as an enterprise software firm, MicroStrategy has positioned itself as a Bitcoin development company. Earlier this month, MicroStrategy co-founder and Executive Chairman Michael Saylor said that endeavor involves becoming a Bitcoin bank, which he had described as creating Bitcoin capital market instruments across equity, convertibles, fixed income and preferred shares. The firm also previously disclosed plans to create a decentralized identity protocol on Bitcoin.
MicroStrategy, the world’s largest Bitcoin (BTC) corporate holder, has seen its market capitalization climb from $1.5 billion to over $4 billion in just four years. Co-founder and executive chairman Michael Saylor attributes this rapid growth to the company’s approach to integrating Bitcoin with traditional financial markets. MicroStrategy is pioneering a new market – we’re issuing securities backed by digital capital,” Saylor told The New Zealand Herald in a recent interview.
He explained that the company’s trove of 252,220 Bitcoin is currently valued at $17 billion, reflecting over 1% of all the Bitcoin that will ever be mined. Bringing Bitcoin onto its balance sheet for the first time in 2020, MicroStrategy’s game plan for acquiring Bitcoin has vastly transformed since then. MicroStrategy has been leveraging equity and debt to purchase more Bitcoin than it could otherwise. This year that’s involved issuing convertible notes, which can later be turned into shares by a buyer, and issuing equity through an at-the-money offering program.
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Valuation and Stock Performance
The company offers leveraged exposure to Bitcoin, according to the asset manager Bernstein, which rated the company Outperform with a price target of $290 in a report this week. “We believe investors should view MicroStrategy as an active leveraged Bitcoin equity strategy,” Bernstein analysts wrote. “It actively toggles between equity and long-term convertible debt to offer leveraged exposure to Bitcoin while maintaining conservative leverage.”
Alongside the recent rally in MicroStrategy’s share price, the company’s valuation has increased relative to its Bitcoin holdings, reflected as a premium to net asset value (NAV). As of Thursday, that premium reached 27x, its highest level since February 2021, according to MSTR-tracker. With its stock price rising 426% over the past year, MicroStrategy’s returns have been building a case for its premium, Bernstein analysts wrote. Among factors driving MicroStrategy’s premium, the asset manager pointed to its proven ability to increase its Bitcoin holdings per share and a limited number of comparable investment vehicles offering leveraged exposure.
At the same time, MicroStrategy has some vocal critics, including the Bitcoin skeptic and economist Peter Schiff. On Tuesday he argued on Twitter that eventually MicroStrategy’s valuation and the merits of its Bitcoin strategy will reverse course. “MSTR has got to be the most overvalued stock in the MSCI World Index,” he wrote. “When it finally crashes that’s gonna be the real bloodbath.”
Conclusion
MicroStrategy’s stock has seen tremendous growth since adopting a Bitcoin-focused strategy, but some remain skeptical of its long-term viability. It remains to be seen whether the company can sustain its momentum and premium valuation. Either way, MicroStrategy has established itself as a pioneering force in bringing Bitcoin into the world of traditional finance.
