Analysts are characterizing MicroStrategy’s stock as akin to an “essentially a leveraged Bitcoin ETF” due to its exposure to the cryptocurrency.
In the latest announcement on Wednesday, December 27, MicroStrategy Inc (NASDAQ: MSTR) acquired an additional 14,620 Bitcoins in the past month, spending $615.7 million at an average price of $42,110 per bitcoin, as outlined in a recent Form 8-K filing on its website. After MicroStrategy’s purchase, the Bitcoin (BTC) price has surged past $43,000 as of press time.
As per the filing, MicroStrategy conducted the purchases between November 30 and December 26. With this latest acquisition, MicroStrategy’s total Bitcoin holdings now stand at 189,150, acquired at an average price of $31,168. The company has also invested a total of $5.89 billion in its Bitcoin holdings, which currently have a market value of $8.1 billion, reflecting an on-paper increase of $2.2 billion.
MicroStrategy (MSTR) Stock Outperforms Bitcoin (BTC) 2:1
MicroStrategy (MSTR) has experienced a remarkable surge in its stock price, climbing over 350% in 2023, driven largely by expectations surrounding the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States. As of the latest update, MSTR is trading at $654, reflecting an 8.3% surge yesterday on Wednesday, December 27.
The performance of MicroStrategy’s stock has outpaced Bitcoin’s gains, with the stock rising by an impressive 350% since the beginning of 2023, while Bitcoin’s price has seen a 160% year-to-date increase.
Analysts are characterizing MicroStrategy’s stock as akin to an “essentially a leveraged Bitcoin ETF” due to its exposure to the cryptocurrency. An analysis from Seeking Alpha, based on the company’s quarterly earnings, further highlights the use of a combination of long-term, low-interest debt, and share issuance to fund MicroStrategy’s Bitcoin purchases. As of September 30, the company’s total liabilities stood at $2.534 billion, marking a 7.7% decline year-over-year, with long-term liabilities totaling $2.180 billion. The analysis further notes:
“The senior convertible notes aren’t due until December 2025. From Saylor’s perspective, it’s unwise to save in a fiat currency that is perpetually debased when he can instead put the company’s treasury in a liquid asset that doesn’t suffer from dramatic supply inflation.”
Awaiting the Bitcoin ETF Approval
The surge in Bitcoin’s price in 2023, surpassing 160%, is due to the anticipation surrounding the potential approval of spot Bitcoin exchange-traded funds (ETFs) on Wall Street. Despite challenging macroeconomic conditions and industry headwinds, Bitcoin has outperformed major traditional assets. Spot trading involves the instantaneous buying or selling of Bitcoin at current market prices.
The US Securities and Exchange Commission is expected to make a decision in early January regarding the approval of Bitcoin spot trading through ETFs, with industry giants like Fidelity and BlackRock in contention. Approval of ETFs could enhance Bitcoin’s prices and market liquidity, making the cryptocurrency more accessible to a broader investor audience.
In a recent Bloomberg interview, Michael Saylor discussed the distinctive features of a Bitcoin ETF compared to MicroStrategy’s stocks for both potential and existing investors. Responding to concerns about the potential negative impact of an ETF launch on MicroStrategy (MSTR), Saylor emphasized that MicroStrategy differs as an operating company, unlike ETFs that are unleveraged and charge fees.
Saylor highlighted MicroStrategy’s capability to generate additional BTC through profit and loss (P&L) or capital markets operations. Using an analogy, he likened MicroStrategy to an airline, emphasizing its unique position compared to ETFs, which he compared to shipping lines. Essentially, Saylor suggested that MicroStrategy offers higher performance and leverage without associated fees.
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