MicroStrategy: Attempting A High-Stakes Play In Speculative Finance

Seeking Alpha2024-12-30

SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business...

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Guavaxf30
2024-12-30
Guavaxf30
Yes. This is certainly not a play for the weak- hearted. The base is solely on it's Bitcoin Treasury value running higher than the valuation of MSTR as a whole. With the heavy retreat of BTC at the moment, there is a very real danger of stakeholders left holding an empty bag. Be very careful. Be very focused.

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicroStrategy: Attempting A High-Stakes Play In Speculative Finance\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-30 17:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4746829-microstrategy-attempting-high-stakes-play-in-speculative-finance><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business...</p>\n\n<a href=\"https://seekingalpha.com/article/4746829-microstrategy-attempting-high-stakes-play-in-speculative-finance\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"MSTR","symbol_name":"MicroStrategy","start_time":0,"source_url":"https://seekingalpha.com/article/4746829-microstrategy-attempting-high-stakes-play-in-speculative-finance","article_id":"1154230701","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1154230701","pubTimestamp":1735549531,"columns":[],"sourceInfo":{"source_id":"lsy1728464409321","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"MSTR":"MicroStrategy"},"translate_title":"MicroStrategy：尝试投机性金融中的高风险游戏","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MSTR":1.1},"content_text":"SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business software to a Bitcoin investment vehicle, leveraging convertible bonds and equity offerings.MicroStrategy's \"BTC Yield\" measures growth in Bitcoin holdings per share, with a YTD yield of 17% and a long-term target of 6%-10% annually.MicroStrategy stock is currently trading at $87.2 billion market cap, vs. an estimated fair value of its Bitcoin holdings of approximately $43.5 billion.In my view, MicroStrategy stock may be the most overhyped equity asset of the ongoing bull market. YTD, shares have returned 422% while the market cap of MicroStrategy has briefly topped $100 billion. Since December 2024, the company's stock has also been included in the Nasdaq 100 benchmark.MSTR vs SP500I consider investing in MicroStrategy as highly risky due to the company's speculative bet on Bitcoin as its core asset, exposing shareholders to the cryptocurrency's extreme volatility. Unlike traditional companies whose valuations are tied to operational performance, MicroStrategy's financial upside builds largely on Bitcoin's (hoped) price appreciation. This dependency transforms MicroStrategy into a de facto Bitcoin investment vehicle. That said, if investors are bullish on Bitcoin, it may be preferable buying the cryptocurrency directly, instead of through MSTR. The argument for this is anchored on MicroStrategy's market cap premium of nearly 100% vs. the company's Bitcoin holdings of approximately $43.5 billion (fair value).Explaining The MicroStrategy's Business ModelMicroStrategy, originally a business intelligence software company, has shifted its business model into a holding company by investing heavily in Bitcoin. To finance its Bitcoin acquisitions, MicroStrategy is leveraging financial instruments such as convertible bonds and equity offerings. In other words, it's a leveraged investment strategy that aims to amplify potential returns on the backdrop of Bitcoins price appreciation.Since MicroStrategy's initial purchase of Bitcoin in August 2020, MicroStrategy has accumulated 444,262 Bitcoins, corresponding to about 2% of the total supply. As of 2023 December, these Bitcoin holdings are worth approximately $43.5 billion.MicroStrategy Bitcoin holdingsBitboThe Strategy: Buying Bitcoin; Betting On Crypto UpsideTo understand how effectively MicroStrategy is buying Bitcoin on behalf of its shareholders, the company refers to a KPI described as \"BTC Yield\". Basically, \"BTC Yield\" is a performance indicator that measures the percentage change over time in the ratio of the company's bitcoin holdings to its assumed diluted shares outstanding (from raising equity and convertible debt). With that said, the company calculates \"BTC Yield\" by comparing the ratio of total bitcoin holdings to assumed diluted shares outstanding at different points in time. Assumed diluted shares include actual shares outstanding plus potential shares from convertible notes, stock options, and other equity instruments.It's important to note that BTC Yield is not a traditional financial return measure like dividend yield or interest rate. Instead, it focuses specifically on the growth of bitcoin holdings per share, providing insight into MicroStrategy's strategy of leveraging equity and debt financing to acquire bitcoin in a manner it believes is accretive to shareholders.As of Q3 2024, MicroStrategy reported a YTD \"BTC Yield\" of 17%, which suggests outperformance of growth in the company's bitcoin holdings relative to its share count; and thus, \"intelligent buying\" of Bitcoin. For context, the company has set a long-term target to achieve an annual BTC Yield of 6% to 10% between 2025 and 2027.MicroStrategy Q3 - BTC yieldMicroStrategy Q3Investors should consider, however, that MicroStrategy's projected 6-10% Bitcoin yield is not guaranteed. In fact, the yield is achieved only if Bitcoin prices rise by at least the target yield. That's a speculative proposition.Moreover, and adding to the speculative element, MicroStrategy has communicated ambition to raise more capital for buying Bitcoin. Over the next 3 years, MicroStrategy is aiming for $42 billion of cumulative fundraising, about half of which should come from equity.MicroStrategy Q3 - FundraisingMicroStrategy Q3Not Bullish On MicroStrategy As A Bitcoin Investment VehiclePersonally, I am not an investor in MicroStrategy and I have no plans taking a position. In my view, MicroStrategy's stock is a proxy for Bitcoin investment. With that said, investors should consider that Bitcoin is a highly volatile asset. If the value of Bitcoin would drop, then share price performance would undoubtedly suffer. But of course, the same is true for the reverse: if Bitcoin rises, MicroStrategy should do well.Most importantly, investors who are bullish on Bitcoin may find it more advantageous to purchase the cryptocurrency directly rather than through MicroStrategy. This argument builds on MSTR's notable market cap premium—nearly 100%—relative to its Bitcoin holdings. For context, MicroStrategy stock is currently trading at around $80 billion market cap, vs. an estimated fair value of its Bitcoin holdings of approximately $43.5 billion.Option Speculation Driving MSTR SharesMicroStrategy's share price volatility, has attracted lots of speculative investor interest that is set to drive more volatility than what would have been expected by the company's \"fundamentals\". Notably, by the end of Q3 2024 MicroStrategy had an options open interest relative to its market cap of over 100%, which tops anything that we see in the S&P 500.This elevated options activity implies that traders are not only betting on price direction but are also using leverage to magnify gains, creating conditions ripe for forced hedging adjustments by market makers. Such adjustments can exacerbate intraday volatility, making the stock susceptible to whipsaw price action—sharp moves both up and down—especially near options expiration dates or during crypto market turbulence. Furthermore, the elevated speculative positioning raises systemic risks, as a sudden reversal in sentiment or a downturn in Bitcoin prices could lead to a cascade of liquidations and accelerated declines, driven by options unwinding. This environment reflects broader trends of risk-taking behavior, where MicroStrategy serves as both a proxy for crypto exposure and a high-beta speculative asset, amplifying its vulnerability to rapid sentiment shifts and market shocks.MicroStrategy Q3 - FundraisingMicroStrategy Q3Doubtful Operating ValueAt the same time, MicroStrategy does not really offer investors any operational value, currently: As of Q3 2024, the company's software business is generating about $450 million of annual revenue, most of which is recurring. Revenue, however, has been down YoY by about 10%. Moreover, the company is far from being profitable - losing about $19 million through its operations in the third quarter of 2024.MicroStrategy Q3 - Operating PerformanceMicroStrategy Q3Investor TakeawayMicroStrategy's Bitcoin investment strategy has attracted (arguably speculative) investor interest, causing a surge in the company's stock price. In 2024, MSTR shares have briefly risen by over 500% (now up 422%), much more than Bitcoin's own appreciation. This increase in market capitalization has been further fueled by the company's inclusion in the Nasdaq-100 index in December 2024.Investing in MicroStrategy is highly risky, in my view, because of the company's heavy reliance on Bitcoin as a core asset, leaving shareholders vulnerable to the cryptocurrency's extreme volatility. Essentially, the company operates as a proxy for Bitcoin investment and is thus a directional bet that the price of the crypto asset will rise. However, for those bullish on Bitcoin, purchasing the cryptocurrency directly may be a more straightforward and cost-effective option. This view is supported by MicroStrategy's market cap trading at nearly a 100% premium compared to its Bitcoin holdings, valued at approximately $43.5 billion (fair value).","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":387243534922168,"gmtCreate":1735572405641,"gmtModify":1735573857849,"author":{"id":"3576140222331577","authorId":"3576140222331577","name":"Guavaxf30","avatar":"https://static.tigerbbs.com/1ff15ff6aa254c9130f9af922f7e2447","vip":1,"crmLevel":9,"crmLevelSwitch":1,"authorIdStr":"3576140222331577","idStr":"3576140222331577"},"htmlText":"Yes. This is certainly not a play for the weak- hearted. The base is solely on it's Bitcoin Treasury value running higher than the valuation of MSTR as a whole.&nbsp; With the heavy retreat of BTC at the moment, there is a very&nbsp;real danger of stakeholders left holding an empty bag.&nbsp; Be very careful. Be very focused.","listText":"Yes. This is certainly not a play for the weak- hearted. The base is solely on it's Bitcoin Treasury value running higher than the valuation of MSTR as a whole.&nbsp; With the heavy retreat of BTC at the moment, there is a very&nbsp;real danger of stakeholders left holding an empty bag.&nbsp; Be very careful. Be very focused.","text":"Yes. This is certainly not a play for the weak- hearted. The base is solely on it's Bitcoin Treasury value running higher than the valuation of MSTR as a whole. With the heavy retreat of BTC at the moment, there is a very real danger of stakeholders left holding an empty bag. Be very careful. Be very focused.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/387243534922168","repostId":1154230701,"repostType":2,"repost":{"id":"1154230701","kind":"news","pubTimestamp":1735549531,"share":"https://ttm.financial/m/news/1154230701?lang=&edition=fundamental","pubTime":"2024-12-30 17:05","market":"us","language":"en","title":"MicroStrategy: Attempting A High-Stakes Play In Speculative Finance","url":"https://stock-news.laohu8.com/highlight/detail?id=1154230701","media":"Seeking Alpha","summary":"SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business","content":"<html><head></head><body><h2 id=\"id_1949478730\">Summary</h2><ul style=\"\"><li><p>MicroStrategy&#39;s stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.</p></li><li><p>The company&#39;s business model has shifted from business software to a Bitcoin investment vehicle, leveraging convertible bonds and equity offerings.</p></li><li><p>MicroStrategy&#39;s &#34;BTC Yield&#34; measures growth in Bitcoin holdings per share, with a YTD yield of 17% and a long-term target of 6%-10% annually.</p></li><li><p>MicroStrategy stock is currently trading at $87.2 billion market cap, vs. an estimated fair value of its Bitcoin holdings of approximately $43.5 billion.</p></li></ul><p>In my view, <a href=\"https://laohu8.com/S/MSTR\">MicroStrategy</a> stock may be the most overhyped equity asset of the ongoing bull market. YTD, shares have returned 422% while the market cap of MicroStrategy has briefly topped $100 billion. Since December 2024, the company&#39;s stock has also been included in the Nasdaq 100 benchmark.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ab73b93f3ef4aed7c6adfd7be30bed70\" alt=\"MSTR vs SP500\" title=\"MSTR vs SP500\" tg-width=\"640\" tg-height=\"233\"/><span>MSTR vs SP500</span></p><p>I consider investing in MicroStrategy as highly risky due to the company&#39;s speculative bet on Bitcoin as its core asset, exposing shareholders to the cryptocurrency&#39;s extreme volatility. Unlike traditional companies whose valuations are tied to operational performance, MicroStrategy&#39;s financial upside builds largely on Bitcoin&#39;s (hoped) price appreciation. This dependency transforms MicroStrategy into a de facto Bitcoin investment vehicle. That said, if investors are bullish on Bitcoin, it may be preferable buying the cryptocurrency directly, instead of through MSTR. The argument for this is anchored on MicroStrategy&#39;s market cap premium of nearly 100% vs. the company&#39;s Bitcoin holdings of approximately $43.5 billion (fair value).</p><h2 id=\"id_726819827\">Explaining The MicroStrategy&#39;s Business Model</h2><p>MicroStrategy, originally a business intelligence software company, has shifted its business model into a holding company by investing heavily in Bitcoin. To finance its Bitcoin acquisitions, MicroStrategy is leveraging financial instruments such as convertible bonds and equity offerings. In other words, it&#39;s a leveraged investment strategy that aims to amplify potential returns on the backdrop of Bitcoins price appreciation.</p><p>Since MicroStrategy&#39;s initial purchase of Bitcoin in August 2020, MicroStrategy has accumulated 444,262 Bitcoins, corresponding to about 2% of the total supply. As of 2023 December, these Bitcoin holdings are worth approximately $43.5 billion.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/e05d196ac96ac805545111b91407b48c\" alt=\"MicroStrategy Bitcoin holdings\" title=\"MicroStrategy Bitcoin holdings\" tg-width=\"640\" tg-height=\"302\"/><span>MicroStrategy Bitcoin holdings</span></p><p style=\"text-align: left;\"><strong>Bitbo</strong></p><h2 id=\"id_902854357\">The Strategy: Buying Bitcoin; Betting On Crypto Upside</h2><p>To understand how effectively MicroStrategy is buying Bitcoin on behalf of its shareholders, the company refers to a KPI described as &#34;BTC Yield&#34;. Basically, &#34;BTC Yield&#34; is a performance indicator that measures the percentage change over time in the ratio of the company&#39;s bitcoin holdings to its assumed diluted shares outstanding (from raising equity and convertible debt). With that said, the company calculates &#34;BTC Yield&#34; by comparing the ratio of total bitcoin holdings to assumed diluted shares outstanding at different points in time. Assumed diluted shares include actual shares outstanding plus potential shares from convertible notes, stock options, and other equity instruments.</p><p>It&#39;s important to note that BTC Yield is not a traditional financial return measure like dividend yield or interest rate. Instead, it focuses specifically on the growth of bitcoin holdings per share, providing insight into MicroStrategy&#39;s strategy of leveraging equity and debt financing to acquire bitcoin in a manner it believes is accretive to shareholders.</p><p>As of Q3 2024, MicroStrategy reported a YTD &#34;BTC Yield&#34; of 17%, which suggests outperformance of growth in the company&#39;s bitcoin holdings relative to its share count; and thus, &#34;intelligent buying&#34; of Bitcoin. For context, the company has set a long-term target to achieve an annual BTC Yield of 6% to 10% between 2025 and 2027.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/faa06d9686e3d1444e43486849206456\" alt=\"MicroStrategy Q3 - BTC yield\" title=\"MicroStrategy Q3 - BTC yield\" tg-width=\"640\" tg-height=\"349\"/><span>MicroStrategy Q3 - BTC yield</span></p><p style=\"text-align: left;\"><strong>MicroStrategy Q3</strong></p><p>Investors should consider, however, that MicroStrategy&#39;s projected 6-10% Bitcoin yield is not guaranteed. In fact, the yield is achieved only if Bitcoin prices rise by at least the target yield. That&#39;s a speculative proposition.</p><p>Moreover, and adding to the speculative element, MicroStrategy has communicated ambition to raise more capital for buying Bitcoin. Over the next 3 years, MicroStrategy is aiming for $42 billion of cumulative fundraising, about half of which should come from equity.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/bd5b75b14143a176041ad0edb9c091fd\" alt=\"MicroStrategy Q3 - Fundraising\" title=\"MicroStrategy Q3 - Fundraising\" tg-width=\"640\" tg-height=\"358\"/><span>MicroStrategy Q3 - Fundraising</span></p><p style=\"text-align: left;\"><strong>MicroStrategy Q3</strong></p><h2 id=\"id_1366517407\">Not Bullish On MicroStrategy As A Bitcoin Investment Vehicle</h2><p>Personally, I am not an investor in MicroStrategy and I have no plans taking a position. In my view, MicroStrategy&#39;s stock is a proxy for Bitcoin investment. With that said, investors should consider that Bitcoin is a highly volatile asset. If the value of Bitcoin would drop, then share price performance would undoubtedly suffer. But of course, the same is true for the reverse: if Bitcoin rises, MicroStrategy should do well.</p><p>Most importantly, investors who are bullish on Bitcoin may find it more advantageous to purchase the cryptocurrency directly rather than through MicroStrategy. This argument builds on MSTR&#39;s notable market cap premium—nearly 100%—relative to its Bitcoin holdings. For context, MicroStrategy stock is currently trading at around $80 billion market cap, vs. an estimated fair value of its Bitcoin holdings of approximately $43.5 billion.</p><h2 id=\"id_1913742380\">Option Speculation Driving MSTR Shares</h2><p>MicroStrategy&#39;s share price volatility, has attracted lots of speculative investor interest that is set to drive <em>more</em> volatility than what would have been expected by the company&#39;s &#34;fundamentals&#34;. Notably, by the end of Q3 2024 MicroStrategy had an options open interest relative to its market cap of over 100%, which tops anything that we see in the S&amp;P 500.</p><p>This elevated options activity implies that traders are not only betting on <strong>price direction</strong> but are also using leverage to magnify gains, creating conditions ripe for <strong>forced hedging adjustments</strong> by market makers. Such adjustments can exacerbate <strong>intraday volatility</strong>, making the stock susceptible to <strong>whipsaw price action</strong>—sharp moves both up and down—especially near <strong>options expiration dates</strong> or during <strong>crypto market turbulence</strong>. Furthermore, the elevated speculative positioning raises <strong>systemic risks</strong>, as a sudden reversal in sentiment or a downturn in Bitcoin prices could lead to a <strong>cascade of liquidations</strong> and accelerated declines, driven by options unwinding. This environment reflects broader trends of <strong>risk-taking behavior</strong>, where MicroStrategy serves as both a <strong>proxy for crypto exposure</strong> and a <strong>high-beta speculative asset</strong>, amplifying its vulnerability to rapid sentiment shifts and market shocks.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/a95659a544e35b13462fc78e3ddde4c9\" alt=\"MicroStrategy Q3 - Fundraising\" title=\"MicroStrategy Q3 - Fundraising\" tg-width=\"640\" tg-height=\"132\"/><span>MicroStrategy Q3 - Fundraising</span></p><p style=\"text-align: left;\"><strong>MicroStrategy Q3</strong></p><h2 id=\"id_1691157134\">Doubtful Operating Value</h2><p>At the same time, MicroStrategy does not really offer investors any operational value, currently: As of Q3 2024, the company&#39;s software business is generating about $450 million of annual revenue, most of which is recurring. Revenue, however, has been down YoY by about 10%. Moreover, the company is far from being profitable - losing about $19 million through its operations in the third quarter of 2024.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/fe1080badeadb0d2165a9e8d0084901f\" alt=\"MicroStrategy Q3 - Operating Performance\" title=\"MicroStrategy Q3 - Operating Performance\" tg-width=\"640\" tg-height=\"205\"/><span>MicroStrategy Q3 - Operating Performance</span></p><p style=\"text-align: left;\"><strong>MicroStrategy Q3</strong></p><h2 id=\"id_2859020152\">Investor Takeaway</h2><p>MicroStrategy&#39;s Bitcoin investment strategy has attracted (arguably speculative) investor interest, causing a surge in the company&#39;s stock price. In 2024, MSTR shares have briefly risen by over 500% (now up 422%), much more than Bitcoin&#39;s own appreciation. This increase in market capitalization has been further fueled by the company&#39;s inclusion in the Nasdaq-100 index in December 2024.</p><p>Investing in MicroStrategy is highly risky, in my view, because of the company&#39;s heavy reliance on Bitcoin as a core asset, leaving shareholders vulnerable to the cryptocurrency&#39;s extreme volatility. Essentially, the company operates as a proxy for Bitcoin investment and is thus a directional bet that the price of the crypto asset will rise. However, for those bullish on Bitcoin, purchasing the cryptocurrency directly may be a more straightforward and cost-effective option. This view is supported by MicroStrategy&#39;s market cap trading at nearly a 100% premium compared to its Bitcoin holdings, valued at approximately $43.5 billion (fair value).</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>MicroStrategy: Attempting A High-Stakes Play In Speculative Finance</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicroStrategy: Attempting A High-Stakes Play In Speculative Finance\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-30 17:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4746829-microstrategy-attempting-high-stakes-play-in-speculative-finance><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business...</p>\n\n<a href=\"https://seekingalpha.com/article/4746829-microstrategy-attempting-high-stakes-play-in-speculative-finance\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"MSTR":"MicroStrategy"},"source_url":"https://seekingalpha.com/article/4746829-microstrategy-attempting-high-stakes-play-in-speculative-finance","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1154230701","content_text":"SummaryMicroStrategy's stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties.The company's business model has shifted from business software to a Bitcoin investment vehicle, leveraging convertible bonds and equity offerings.MicroStrategy's \"BTC Yield\" measures growth in Bitcoin holdings per share, with a YTD yield of 17% and a long-term target of 6%-10% annually.MicroStrategy stock is currently trading at $87.2 billion market cap, vs. an estimated fair value of its Bitcoin holdings of approximately $43.5 billion.In my view, MicroStrategy stock may be the most overhyped equity asset of the ongoing bull market. YTD, shares have returned 422% while the market cap of MicroStrategy has briefly topped $100 billion. Since December 2024, the company's stock has also been included in the Nasdaq 100 benchmark.MSTR vs SP500I consider investing in MicroStrategy as highly risky due to the company's speculative bet on Bitcoin as its core asset, exposing shareholders to the cryptocurrency's extreme volatility. Unlike traditional companies whose valuations are tied to operational performance, MicroStrategy's financial upside builds largely on Bitcoin's (hoped) price appreciation. This dependency transforms MicroStrategy into a de facto Bitcoin investment vehicle. That said, if investors are bullish on Bitcoin, it may be preferable buying the cryptocurrency directly, instead of through MSTR. The argument for this is anchored on MicroStrategy's market cap premium of nearly 100% vs. the company's Bitcoin holdings of approximately $43.5 billion (fair value).Explaining The MicroStrategy's Business ModelMicroStrategy, originally a business intelligence software company, has shifted its business model into a holding company by investing heavily in Bitcoin. To finance its Bitcoin acquisitions, MicroStrategy is leveraging financial instruments such as convertible bonds and equity offerings. In other words, it's a leveraged investment strategy that aims to amplify potential returns on the backdrop of Bitcoins price appreciation.Since MicroStrategy's initial purchase of Bitcoin in August 2020, MicroStrategy has accumulated 444,262 Bitcoins, corresponding to about 2% of the total supply. As of 2023 December, these Bitcoin holdings are worth approximately $43.5 billion.MicroStrategy Bitcoin holdingsBitboThe Strategy: Buying Bitcoin; Betting On Crypto UpsideTo understand how effectively MicroStrategy is buying Bitcoin on behalf of its shareholders, the company refers to a KPI described as \"BTC Yield\". Basically, \"BTC Yield\" is a performance indicator that measures the percentage change over time in the ratio of the company's bitcoin holdings to its assumed diluted shares outstanding (from raising equity and convertible debt). With that said, the company calculates \"BTC Yield\" by comparing the ratio of total bitcoin holdings to assumed diluted shares outstanding at different points in time. Assumed diluted shares include actual shares outstanding plus potential shares from convertible notes, stock options, and other equity instruments.It's important to note that BTC Yield is not a traditional financial return measure like dividend yield or interest rate. Instead, it focuses specifically on the growth of bitcoin holdings per share, providing insight into MicroStrategy's strategy of leveraging equity and debt financing to acquire bitcoin in a manner it believes is accretive to shareholders.As of Q3 2024, MicroStrategy reported a YTD \"BTC Yield\" of 17%, which suggests outperformance of growth in the company's bitcoin holdings relative to its share count; and thus, \"intelligent buying\" of Bitcoin. For context, the company has set a long-term target to achieve an annual BTC Yield of 6% to 10% between 2025 and 2027.MicroStrategy Q3 - BTC yieldMicroStrategy Q3Investors should consider, however, that MicroStrategy's projected 6-10% Bitcoin yield is not guaranteed. In fact, the yield is achieved only if Bitcoin prices rise by at least the target yield. That's a speculative proposition.Moreover, and adding to the speculative element, MicroStrategy has communicated ambition to raise more capital for buying Bitcoin. Over the next 3 years, MicroStrategy is aiming for $42 billion of cumulative fundraising, about half of which should come from equity.MicroStrategy Q3 - FundraisingMicroStrategy Q3Not Bullish On MicroStrategy As A Bitcoin Investment VehiclePersonally, I am not an investor in MicroStrategy and I have no plans taking a position. In my view, MicroStrategy's stock is a proxy for Bitcoin investment. With that said, investors should consider that Bitcoin is a highly volatile asset. If the value of Bitcoin would drop, then share price performance would undoubtedly suffer. But of course, the same is true for the reverse: if Bitcoin rises, MicroStrategy should do well.Most importantly, investors who are bullish on Bitcoin may find it more advantageous to purchase the cryptocurrency directly rather than through MicroStrategy. This argument builds on MSTR's notable market cap premium—nearly 100%—relative to its Bitcoin holdings. For context, MicroStrategy stock is currently trading at around $80 billion market cap, vs. an estimated fair value of its Bitcoin holdings of approximately $43.5 billion.Option Speculation Driving MSTR SharesMicroStrategy's share price volatility, has attracted lots of speculative investor interest that is set to drive more volatility than what would have been expected by the company's \"fundamentals\". Notably, by the end of Q3 2024 MicroStrategy had an options open interest relative to its market cap of over 100%, which tops anything that we see in the S&P 500.This elevated options activity implies that traders are not only betting on price direction but are also using leverage to magnify gains, creating conditions ripe for forced hedging adjustments by market makers. Such adjustments can exacerbate intraday volatility, making the stock susceptible to whipsaw price action—sharp moves both up and down—especially near options expiration dates or during crypto market turbulence. Furthermore, the elevated speculative positioning raises systemic risks, as a sudden reversal in sentiment or a downturn in Bitcoin prices could lead to a cascade of liquidations and accelerated declines, driven by options unwinding. This environment reflects broader trends of risk-taking behavior, where MicroStrategy serves as both a proxy for crypto exposure and a high-beta speculative asset, amplifying its vulnerability to rapid sentiment shifts and market shocks.MicroStrategy Q3 - FundraisingMicroStrategy Q3Doubtful Operating ValueAt the same time, MicroStrategy does not really offer investors any operational value, currently: As of Q3 2024, the company's software business is generating about $450 million of annual revenue, most of which is recurring. Revenue, however, has been down YoY by about 10%. Moreover, the company is far from being profitable - losing about $19 million through its operations in the third quarter of 2024.MicroStrategy Q3 - Operating PerformanceMicroStrategy Q3Investor TakeawayMicroStrategy's Bitcoin investment strategy has attracted (arguably speculative) investor interest, causing a surge in the company's stock price. In 2024, MSTR shares have briefly risen by over 500% (now up 422%), much more than Bitcoin's own appreciation. This increase in market capitalization has been further fueled by the company's inclusion in the Nasdaq-100 index in December 2024.Investing in MicroStrategy is highly risky, in my view, because of the company's heavy reliance on Bitcoin as a core asset, leaving shareholders vulnerable to the cryptocurrency's extreme volatility. Essentially, the company operates as a proxy for Bitcoin investment and is thus a directional bet that the price of the crypto asset will rise. However, for those bullish on Bitcoin, purchasing the cryptocurrency directly may be a more straightforward and cost-effective option. This view is supported by MicroStrategy's market cap trading at nearly a 100% premium compared to its Bitcoin holdings, valued at approximately $43.5 billion (fair value).","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":2,"commentSize":1,"repostSize":1,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1154230701"}