Fast Facts
- Acquired 2,395 BTC for ~$42.8mm at an average cost of $17,871 / BTC between November 1, 2022, and December 21, 2022
- Sold ~704 bitcoins for ~$11.8 million, at an average price of approximately $16,776 / BTC, net of fees and expenses on December 22, 2022
- Acquired an additional 810 BTC for ~$13.6mm at an average cost of $16,845 / BTC on December 24, 2022
Who is Microstrategy
MicroStrategy is a publicly-traded business intelligence company headquartered in Tysons Corner, Virginia. The company provides mobile and cloud-based software that allows businesses to analyze and visualize data to make better decisions. In August 2020, MicroStrategy made headlines when it announced that it had purchased $250 million worth of Bitcoin as a reserve asset. This was a significant move, as it marked one of the first times a publicly-traded company had invested such a large amount of money into cryptocurrency.
Since then, MicroStrategy has made significant investments in Bitcoin, eventually buying over $2 billion worth of Bitcoin by December 2020. The company’s CEO, Michael Saylor, has become a vocal advocate for Bitcoin and has promoted the cryptocurrency as a hedge against inflation and a store of value. Saylor has said that he believes Bitcoin is a superior alternative to gold and other traditional safe-haven assets and that it has the potential to become the world’s first trillion-dollar asset.
MicroStrategy’s investment in Bitcoin has been seen as a significant endorsement of bitcoin and has helped to boost its mainstream acceptance. The company’s decision to invest in Bitcoin has also been seen as a sign of the growing institutional interest in bitcoin. Many other companies, such as Square and Tesla, have also invested in Bitcoin, and there are signs that more institutional investors are starting to take bitcoin seriously.
While some have criticized MicroStrategy’s investment in Bitcoin, arguing that the cryptocurrency is too volatile and risky, the company’s CEO has defended the decision, arguing that Bitcoin is a long-term play. Saylor has said that MicroStrategy’s investment in Bitcoin is part of a broader strategy to diversify the company’s assets and protect against inflation. He has also emphasized that the company’s investment in Bitcoin is a small percentage of its overall assets and is not taking on undue risk.
The company’s decision to invest a large amount of money in Bitcoin has helped to increase mainstream acceptance of bitcoin. It has also been seen as a sign of the growing institutional interest in Bitcoin. While the decision to invest in Bitcoin has been met with some skepticism, it is clear that MicroStrategy’s CEO and management team believe in bitcoin’s long-term potential.
What are the recent Microstrategy bitcoin activities
Following the above transactions, MicroStrategy holds ~132,500 BTC as of December 27, 2022. The aggregate purchase price reflects ~$4.03bn at an average price of ~$30,397 / BTC, including fees and expenses.
The above chart indicates a 45.6% dislocation from current trading prices and break-even or a $1.8bn loss on their $4.03bn purchase price. For MicroStrategy to return to breakeven, Bitcoin’s price would need to increase by ~84% as of the time of this writing. The 704 BTC sale loss will go towards previous capital gains to generate a tax benefit for 2022.
Over the last twelve months, MicroStrategy’s share price contracted 74% compared to the S&P 500, declining only 19%. Despite the decline in share price, broker estimates remain optimistic, with 75% of FactSet brokers maintaining a buy rating.
Per the above, MicroStrategy has $2.4bn in debt outstanding, the majority of which was used to finance the BTC acquisitions. Per Q3’22 10Q, MicroStrategy’s cash on balance sheet reflects ~$60.4mm or a net debt of ~$2.3bn. As of current NTM EBITDA estimates, the $2.4bn reflects a 25.1x gross leverage figure which is relatively high. However, at current prices, MicroStrategy’s 132,500 BTC reflect ~$2.2bn in liquidity, assuming the position is 100% unencumbered. That being said, if MicroStrategy were to sell its BTC stake, not only would it be taking a significant loss, but the size of its position would likely create mass sell pressure as liquidity and trading volume remain depressed.
