There’s been a lot of excitement around MicroStrategy in recent months, but it’s not because of the software. MicroStrategy has instead become the largest holder of Bitcoin and is using that vast holding to secure shareholder value. All things considered, as long as Bitcoin rises, so does shareholder value, making MicroStrategy a somewhat unique bet in the crypto world.
MicroStrategy Incorporated (MSTR) is an American company specializing in business intelligence, mobile software and cloud-based services. It was founded in 1989 and the company is headquartered in Tysons Corner, Virginia. The powerhouse features advanced analytics capabilities, combined with a robust emphasis on data-driven decision making for enterprise organizations. It offers business analytics services, but lately has been focusing on acquiring Bitcoin.
MicroStrategy’s major product releases consist of the analytics platform: a data visualization, reporting and dashboard offering. The company provides cloud solutions, consulting services and technical support to companies looking to implement and streamline analytics capabilities. Revenues are primarily generated from software licensing fees, cloud subscription fees, consulting and technical support contracts. It serves a broad portfolio of customers, including retail companies, banks, healthcare companies, telecom agencies and others. The end market consists of companies that want to improve their operations by using data analysis.
The company recently purchased $1.5 billion worth of Bitcoin and could add to that as we speak. Total holdings now stand at 439,000 BTC, which is currently valued at $42.5 billion. At one point, the company’s BTC value was almost $48 billion. The company now wants to use more leverage to buy more Bitcoin, but how much is enough for MSTR? And is it really such a good idea to use leverage to buy BTC? The company has already issued $6.2 billion in convertible bonds this year and plans to continue to do the same.
Investors are wondering whether “intelligent leverage,” a term just coined by Chairman Michael Saylor, is a good thing or not. You can understand why someone buys a house with leverage. It is a useful asset that could come in handy when you fall on hard times. But how is it justified to buy Bitcoin with leverage, if it is such a volatile asset and, like gold, useless in difficult times? Intelligent investors would know that whatever the math behind Bitcoin, the math behind the risk will ultimately come back to haunt them. As long as the Bitcoin rally continues, this could be a great stock to add to a portfolio. However, we are bearish on the company’s long-term prospects due to its leveraged Bitcoin spending.
