Janice R. Andrews
In a daring move that reflects the changing feeling in the market, Kerrisdale Capital declared that it will strategically short MicroStrategy shares and acquire bitcoin. The goal of this arbitrage trade is to profit from what the investing company regards as MicroStrategy’s “unjustifiable premium” valuation above bitcoin.
The main point of contention for Kerrisdale Capital is the significant valuation discrepancy between bitcoin and MicroStrategy. Their research indicates that MicroStrategy is selling at an astounding $177,000 for each bitcoin it owns, an excessive price that leaves investors scratching their heads.
“MicroStrategy’s stock has soared dramatically in tandem with the rise in the price of bitcoin. But as is sometimes the case with cryptocurrencies, hype has resulted in exaggerated values,” said Kerrisdale Capital. The company asserts that the days of MicroStrategy shares offering a special mechanism to get exposure to bitcoin are long gone.
Michael Saylor has led MicroStrategy in its aggressive pursuit of bitcoin purchases in recent years, resulting in the company accumulating a sizeable position of 214,246 bitcoins. Even while MicroStrategy’s bitcoin assets are currently worth an amazing $15.2 billion, the company’s enterprise value is more than $38 billion, more than twice as much.
This value dissonance, according to Kerrisdale Capital, shows a stark disparity. They place a low $1.3 billion value on MicroStrategy’s core software firm, pointing out that shareholders are effectively paying $177k per bitcoin—a premium that may be avoided by pursuing other investment options.
The company emphasizes how easily accessible bitcoin is through a range of financial instruments, including spot bitcoin exchange-traded funds (ETFs), which provide investors with a more affordable and direct way to invest in the cryptocurrency. “IBIT, FBTC, and other vehicles provide liquidity and ease of trading, posing a competitive threat to MicroStrategy’s allure,” said Kerrisdale Capital.
MicroStrategy’s value proposition as a gateway to bitcoin is thought to be eroding due to the growing availability of bitcoin investment choices. In light of their doubts about the sustainability of MicroStrategy’s high value, Kerrisdale Capital projects a possible 50% decrease in the company’s shares in relation to bitcoin.
The position taken by Kerrisdale Capital highlights how the bitcoin market is changing and how important it is to use wise investing techniques. The effectiveness of conventional vehicles, such as MicroStrategy shares, is being reevaluated in light of the availability and efficiency of more accessible and effective options, like bitcoin ETFs, as investors traverse the world of digital assets.
