tl;dr
MicroStrategy shares fell 16% to $397.28 following statements from Citron Research, which disclosed a short position against the company while maintaining a long position in Bitcoin. Citron expressed concerns about MicroStrategy's overvaluation, stating that its valuation had become detached from Bi...
MicroStrategy shares fell 16% to $397.28 following statements from Citron Research, which disclosed a short position against the company while maintaining a long position in Bitcoin. Citron expressed concerns about MicroStrategy's overvaluation, stating that its valuation had become detached from Bitcoin fundamentals. This decline erased roughly $20 billion in market value, despite the stock hitting an intraday record of $543.
MicroStrategy has emerged as the second most actively traded stock on the Nasdaq by dollar volume. The company's aggressive capital raising strategy has intensified scrutiny of its valuation premium. It completed a $3 billion convertible debt offering, upsized from an initial target of $1.75 billion due to strong investor demand. The company aims to raise $42 billion through equal amounts of stock and bond sales through 2027 to expand its Bitcoin holdings.
MicroStrategy holds 331,200 BTC acquired at an average price of $49,874 per coin, with the total value of its Bitcoin holdings standing at approximately $32 billion. The company's market capitalization has swelled to around $107 billion. Despite Thursday's decline, the stock is up nearly 500% year-to-date compared to Bitcoin's 110% gain and the S&P 500's 25% advance.
Citron's short position implies that maintaining such outperformance may prove challenging as investors weigh the merits of MicroStrategy's premium against more direct Bitcoin investment vehicles.
MicroStrategy shares fell 16% to $397.28 Thursday, following statements from influential investment firm Citron Research that it placed a short position against the company while maintaining a long position in Bitcoin. The disclosure reveals mounting concerns about the company’s stock being overvalued due to what some perceive as an overly excessive company valuation.
The decline, which erased roughly $20 billion in market value, marked a dramatic reversal from early trading when the stock hit an intraday record of $543. MicroStrategy has since emerged as the second most actively traded stock on the Nasdaq by dollar volume, trailing Nvidia, according to Eric Balchunas, senior ETF analyst at Bloomberg.
The company's aggressive capital raising strategy has also intensified scrutiny of its valuation premium. Adjusted for debt and revenue, the company trades at roughly 3.5 times the value of its Bitcoin holdings. It also completed a $3 billion convertible debt offering on Thursday, upsized from an initial target of $1.75 billion due to strong investor demand. This forms part of MicroStrategy's ambitious "21/21" strategy unveiled in October, which aims to raise $42 billion through equal amounts of stock and bond sales through 2027 to expand its Bitcoin holdings.
MicroStrategy operates like a leveraged Bitcoin amplifier, using convertible debt to buy more Bitcoin while its stock trades at a premium during bull markets, an analysis from media outlet Sherwood explains. This creates a self-reinforcing cycle where rising Bitcoin prices boost MSTR's stock, allowing it to raise capital to acquire even more Bitcoin cheaply.
Currently holding 331,200 BTC acquired at an average price of $49,874 per coin, MicroStrategy has positioned itself as "the world's first and largest Bitcoin Treasury Company." The total value of its Bitcoin holdings stands at approximately $32 billion. In comparison, the company's market capitalization has swelled to around $107 billion—a dramatic increase compared to late 2023 when the stock traded near parity with its Bitcoin holdings.
However, as Citron's short position implies, maintaining such outperformance may prove challenging as investors weigh the merits of MicroStrategy's premium against more direct Bitcoin investment vehicles.