MicroStrategy lost about 45% from its November peak, trading at about $300 after highs of $543 about six weeks ago.
MicroStrategy is a publicly traded business intelligence company founded in 1989 that pivoted to acquire as much Bitcoin as possible in 2020. The company now holds well over 1% of all Bitcoin that will ever exist, and is now well underway to get its hands on 2%.
With its strategy, MicroStrategy has enshrined its position as the largest corporate Bitcoin holder and attracted attention as a potential leveraged Bitcoin bet for institutional investors. Late November reports highlighted how major Wall Street companies were accumulating MicroStrategy shares as a way to gain leveraged exposure to Bitcoin. Benchmark analyst Mark Palmer wrote in a note to investors at the time:
“MSTR’s ability to generate compounding yield on its bitcoin holdings, enabled by leverage accrued through the repeated tapping of the U.S. capital markets, differentiates its stock from alternative means of gaining exposure to bitcoin such as spot bitcoin ETFs.”
The crash
Still, since then, the magic slowly faded. Just days later MicroStrategy shares fell 16% from $535 to $397. At the time, major investment firm Citron Research declared that the company decided to short MicroStrategy while going long on Bitcoin.
Citron Research explains that it recommended investing in MicroStrategy with a $700 target four years ago. According to the company, “MicroStrategy was the ultimate way to invest in Bitcoin.”
Adjusting for share variations, Microstrategy shares hit over $5,000 — well over Citron’s objective. Still, Bitcoin maturing as an asset is now making those shares a much less sensible investment:
“Now, with Bitcoin investing easier than ever […], [MicroStrategy]’s volume has completely detached from BTC fundamentals. While Citron remains bullish on Bitcoin, we’ve hedged with a short [MicroStrategy] position.”
Something that may not help MicroStrategy are recent rumors that it may have to stop buying more Bitcoin due to a purported blackout period, which is preventing it from issuing shares or convertible debt. Publicly traded companies often self-impose these kinds of blackout periods and restrict some financial activities to comply with regulations, or avoid attracting regulatory attention.
