MicroStrategy (MSTR) has become an attractive option for investors seeking exposure to Bitcoin due to the Securities and Exchange Commission’s (SEC) delay in approving spot Bitcoin ETF proposals. The company has accumulated over 137,000 unencumbered Bitcoins, making it one of the largest publicly traded corporate holders of the cryptocurrency.
Unlike other stocks tied to Bitcoin, such as Grayscale Bitcoin Trust (GBTC) and Bitcoin miners like Marathon Digital Holdings (MARA) and Riot Platforms (RIOT), MicroStrategy has a stable core business that is not heavily impacted by short-term Bitcoin price fluctuations. The company is an enterprise software provider with a solid customer base and a transitioning business model that is moving towards generating revenues from subscriptions. This stable business provides a competitive advantage and limits the downside risk to MicroStrategy’s share price.
In addition to its core business, MicroStrategy has access to low-cost capital, allowing it to raise funds at attractive terms. The company’s debt and convertible notes have a bundled weighted average interest rate of approximately 1.6%, compared to the blended weighted average interest rate of 2.1% at the end of 2022. This low-cost debt allows MicroStrategy to accumulate Bitcoin, which is expected to increase in value over time.
MicroStrategy also benefits from its ability to raise capital through the issuance of new shares. The company has a relatively low outstanding share count compared to other players in the Bitcoin space, such as Marathon Digital Holdings and Riot Platforms. This gives MicroStrategy more room to raise additional equity financing in the future.
However, there are risks associated with investing in MicroStrategy. If the company decides to dispose of its Bitcoin holdings, it could lead to a negative reaction from investors. Additionally, MicroStrategy’s valuation is challenging due to its dual nature as a software company and a Bitcoin holder. Investors should also be cautious of the potential risks associated with overleveraging and the possibility of Bitcoin price declines.
In conclusion, MicroStrategy offers investors a convenient way to gain exposure to Bitcoin through a stock brokerage account. Its stable core business and access to low-cost capital make it an attractive option for investors looking to profit from Bitcoin’s price action. However, investors should be aware of the risks associated with the company and the potential downside of its Bitcoin strategy.
