(1) Based on @michael_saylor's post earlier today, MicroStrategy now owns 70,470 $BTC. Being recently compared to a "Bitcoin hedge fund" on CNBC by @MelissaLeeCNBC, I wanted to do a comparative analysis of buying $MSTR as a derivative of Bitcoin vs. buying Bitcoin outright.
(2) Per Schwab data, $MSTR has 9.267M shares outstanding trading at roughly $318/share. Essentially, a $318 investment in $MSTR translates into owning 0.76% Bitcoin (70,470 $BTC/9.267M shares) vs. 1.4% of a Bitcoin when buying the asset outright at a current price of $22,800.
(3) Subsequently, we can conclude that buying $MSTR to gain $BTC exposure is nearly half as efficient as buying $BTC directly. It's essentially a premium! If the value of $MSTR's Bitcoin is $1.6B & their market cap is $2.8B, Bitcoin currently comprises 57% of the company's value!
(4) The "premium" of buying $MSTR as a derivative of $BTC seems less significant considering that investors also gain ownership in a business intelligence, data analytics & cloud services tech firm that had Q3 revenues of $127M (+6.7% YoY). It's concerning that they had a net...
(5) loss of ($14.2M), but they have generated profits in the past. In regards to the hedge fund question, $GBTC and $BITW trade at 50% & 316% premiums to NAV, respectively. $MSTR's "premium" doesn't seem so lofty when you realize you're buying a company that has tangible...
(6) assets that produce cash flows in industries w/ strong tailwinds. If someone wants to participate in $BTC's upside & limit their allocation to U.S. equities or to incur company-specific risk, it's more efficient to buy $BTC or $GBTC vs. $MSTR. But this comes with the...
(7) risk of owning 100% of $BTC's downside! Buying $MSTR gives an investor exposure to the upside & downside of $BTC, of $MSTR as an individual company & to the broader risk/reward of the stock market. For example, $MSTR gained +5.44% today vs. $GBTC's +0.44%.
(8) I think there could be room in a well-diversified portfolio for some $MSTR allocation, depending on risk tolerance. In fact, $MSTR's Bitcoin "premium" can actually be seen as the cost of having a diversified exposure to $BTC, considering that it is 57% of $MSTR's market cap!
(9) As a metaphor: imagine you were bullish on Asset X & Asset Y, but could only buy 1 of them. Someone offers you the ability to buy a security that has an allocation of 57% to X & 43% to Y. Would you choose X, Y, or the hybrid security? $MSTR is the hybrid of $BTC & equity.
(11) Correction: in thread (7), $GBTC's performance should be updated to +4.58%.
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