MicroStrategy (NASDAQ: MSTR) shares rose again this week. S&P Global Market Intelligence reported an 11.9% increase in the Bitcoin-centered company this week. Investors are betting on MicroStrategy's future as Bitcoin nears its peak. Stock has risen 500% in a year.
Buying with debt Bitcoin MicroStrategy went from a modest software company to buying Bitcoin with all its capital and significant debt in recent years. Its overall business approach.
This plan has worked, as its shares have up 1,000% in five years and its market valuation is close to $30 billion. It raised $600 million in convertible notes this month to bolster its debt-fueled Bitcoin bet.
MicroStrategy investors presumably think the company is a good method to invest in Bitcoin. Due to the stock's enormous premium to its Bitcoins, this rationale may be faulty. Kerrisdale Capital's recent short report found that MicroStrategy traded for 2.5 times the value of its Bitcoins, which makes little sense considering the company's modest software subsidiary.
The investing firm shorted MicroStrategy and bought Bitcoin to speculate on this disparity. While retail investors should avoid shorting any firm, this shows how professional investors view MicroStrategy as overvalued.
There are better Bitcoin exposure methods. Bitcoin exchange-traded funds (ETFs) make it easier to invest in Bitcoin. Annual management fees for new ETFs are around 0.25%, barely affecting investment results.
Long-term, buy-and-hold investors shouldn't buy MicroStrategy to get Bitcoin exposure if the Bitcoin on the balance sheet is worth less.
MicroStrategy has done nicely recently. However, it is a Bitcoin bet with a small firm. Why buy MicroStrategy at this price when you can bet on Bitcoin cheaper with an ETF? Not logical. Avoid MicroStrategy for now. There are better Bitcoin exposure methods.
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