MicroStrategy stock reaches highest price since Bitcoin purchase price differential began

Coin Circle News Report:
MicroStrategy’s stock price rose 6% to over $230 on Thursday, hitting a new high in nearly 25 years. This marks the sixth consecutive week of growth for MicroStrategy, the world’s largest corporate shareholder, in the ongoing rise of Bitcoin.
Less than two months ago, MicroStrategy’s stock price was $118, declining as Bitcoin hovered around $56,000 on September 6. Despite the subsequent 20% increase in the price of digital assets to $67,600, MicroStrategy’s stock price has nearly doubled in comparison.
MicroStrategy has shed its label as an enterprise software company and positioned itself as a Bitcoin development company.
Earlier this month, MicroStrategy’s co-founder and CEO, Michael Saylor, stated that this effort involves becoming a “Bitcoin bank” and described it as creating “Bitcoin capital market instruments that encompass equities, convertible bonds, fixed income, and preferred stocks.” The company has also previously disclosed plans to create a decentralized identity protocol for Bitcoin.
The company’s treasury of 252,220 Bitcoins is currently worth $17 billion, accounting for over 1% of the total Bitcoin supply. Since first including Bitcoin on its balance sheet in 2020, MicroStrategy’s game plan for acquiring Bitcoin has undergone significant changes.
MicroStrategy has been using equity and debt to purchase more Bitcoin than any other method. This year, that has involved issuing convertible notes, which can later be converted into stocks, and issuing equity through a fund-raising program.
According to asset management company Bernstein, which rated the company as “outperforming” with a target price of $290 in a report this week, the company provides leveraged exposure to Bitcoin. Bernstein analysts wrote, “We believe investors should view MicroStrategy as a positive leveraged Bitcoin stock strategy. It actively switches between equity and long-term convertible debt to provide leveraged exposure to Bitcoin while maintaining a conservative leverage ratio.”
Although spot Bitcoin ETFs have seen over $20 billion, MicroStrategy had already embraced Bitcoin before launching its own in January this year. Saylor recently stated that he sees the company as a bridge between traditional finance and digital assets, playing a pivotal role.
He said, “If we didn’t exist, billions of dollars of capital from the traditional financial markets would not be investing in Bitcoin. The real MicroStrategy business is becoming a leading securities issuer to acquire Bitcoin.”
With the recent rebound in MicroStrategy’s stock price, the company’s valuation has increased relative to its holdings of Bitcoin, resulting in a premium relative to net asset value (NAV). As of Thursday, this premium reached a peak of 2.7 times since February 2021, according to reports.
Bernstein analysts wrote that MicroStrategy’s returns have been justifying its premium as its stock price has risen by 426% over the past year. Among the factors driving MicroStrategy’s premium, the asset management company noted that it has proven capable of increasing its per-share Bitcoin holdings and that the number of comparable investment tools offering leverage exposure is limited.
At the same time, MicroStrategy also has some outspoken critics, including Bitcoin skeptics and economist Peter Schiff. On Tuesday, he argued on Twitter that MicroStrategy’s valuation and the advantages of its Bitcoin strategy will ultimately reverse.
“MSTR is certainly the most overvalued stock in the MSCI World Index,” he wrote. “When it finally collapses, it will be a real bloodbath.”
Editor: Andrew Hayward