Why microstrategy shares 45% in Bitcoin purchases despite the billions

In the year One of the hottest Bitcoin transactions of 2024 is entering the new year.

As of Thursday, MicroStrategy's stock price is down 45% from its November peak — sliding to about $300 from a record high of $543 nearly six weeks ago.

Tysons, a Virginia-based software company, bought billions of dollars worth of cryptocurrency on Bitcoin last year. Fairness And Debt. Monday, the company filled up The store has 446,400 Bitcoins, worth $43 billion, with $200 million worth of Bitcoin purchases.

Since MicroStrategy's stock price peaked, the bitcoin-buying behemoth has bought BTC five separate times, but each purchase has come at a lower price. After buying $5.4 billion worth of bitcoin on November 25, for example, Monday's buying marked the lightest allocation since August. This was not enough, however, to reverse the stock's long-term decline.

Microstrategy has cemented its status as the world's largest corporate owner of Bitcoin—using the asset as a novel way to shore up its balance sheet in 2020—but the firm has also garnered attention on Wall Street recently.

By issuing $7.3 billion worth of convertible notes, a type of debt that can later be converted into stock, the company was able to buy more bitcoin than it could. At the same time, the company's value exceeded $43 billion in bitcoin holdings and its current market capitalization is $73.2 billion.

Investors have been paying a premium for Bitcoin exposure when it comes to MicroStrategy stock, which currently trades at 1.6x its Bitcoin holdings. MSTR Tracker. While investors can get pure Bitcoin exposure through products like spot ETFs or simply buying the asset, that premium reached 3.4x in November.

MicroStrategy's stock price has risen 334% in the past year, outpacing Bitcoin's 116% rise over the same period. This is what Bernstein analysts call a micro-strategyBuilding a case” to the core, with proven ability to increase Bitcoin holdings in stocks.

With an implied price of $200,000 per Bitcoin MicroStrategy shares, however, it seems, “share investors are no longer overvalued with MicroStrategy” in relation to the stock price of its Bitcoin holdings, 10X Research wrote in a note on Thursday.

“The change highlights a growing rationalization among investors who previously bought into MicroStrategy's unofficial narrative of ‘as an leveraged Bitcoin play,'” 10X Research added.

There are leveraged investment products that allow traders to gain greater market exposure to an asset or benchmark. But as MicroStrategy's value has rocketed over the past year, the company's value relative to its bitcoin holdings has been suggested by some as unsustainable.

In November, the influential investment firm Citron Research revealed a short position in Microstrategy, while maintaining a long position in Bitcoin. Citron, which previously supported MicroStrategy, said the company was “done.”It is completely separated“Bitcoin basics.

Although there was talk of a microstrategy premium, it was the firm. Added To the Nasdaq-100 last month, finding a new position in the stock market index tracking high-tech companies. Analysts said the move could have consequences. Billions of dollars Flowing into micro strategy stock.

The inclusion of the micro strategy in the index was appreciated by Bitcoin fans who saw the value of the asset end A few days later for $108,000. Since then, Bitcoin's price has fallen 10%, while MicroStrategy's share price has fallen sharply.

Edited by Andrew Hayward.