FameEX Hot Topics | MicroStrategy's Trading Value Is at an 'Unjustifiably High Premium' Compared to Bitcoin

Kerrisdale Capital has recently critiqued MicroStrategy's standing as a means to invest in Bitcoin, highlighting the company’s diminishing allure following the approval of several spot Bitcoin ETFs this year. The investment firm's March 28 analysis suggests that MicroStrategy (MSTR) shares, once a novel gateway to Bitcoin investment, now trade at an excessive premium that cannot be justified by the digital currency's value alone. Despite a staggering 66.65% monthly and approximately 419% half-yearly increase in MSTR's share price, now at $1,704, Kerrisdale sees an imbalance when compared to Bitcoin's own performance — a 15.8% monthly and 163.31% six-monthly rise, with its price at $70,849.

The critique extends to MicroStrategy's operational metrics, emphasizing a concerning debt-to-asset ratio and a mere $10 million cash flow from its primary software analytics business in 2023, which constitutes just 3% of its total enterprise value. This financial posture contrasts sharply with the company's aggressive Bitcoin acquisitions and its CEO Michael Saylor's confidence. Saylor has consistently argued that MicroStrategy offers an attractive proposition to Bitcoin-optimistic investors, highlighting its leverage without fees against the ETFs' fee-charging, unlevered structures. Furthermore, Saylor announced a rebranding of MicroStrategy as a "Bitcoin development company," underlining its commitment to leveraging its operations and capital for further Bitcoin acquisitions and the network's expansion.

With 214,246 Bitcoins in its treasury, a 54% increase from the previous year, MicroStrategy's strategy under Saylor's leadership has been ambitious. This includes a recent $604 million convertible note sale to purchase an additional 9,245 BTC. However, Kerrisdale Capital argues that the current valuation of MSTR stock implies a Bitcoin price of $177,000, over twice its current market price, suggesting an inflated valuation disconnected from practical investment returns.

Kerrisdale remains bullish on Bitcoin itself but advocates for direct investment or through the newly approved spot Bitcoin ETFs, iShares Bitcoin Trust (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC), where it holds long positions. The firm posits that these alternatives offer more straightforward value than the overvalued MSTR stock, which, despite its significant year-on-year growth, experienced an 11.18% drop on a single day. This assessment points to a broader debate about the evolving landscape of cryptocurrency investments and the search for value beyond traditional asset classes.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.