MicroStrategy Acquires Additional Bitcoin

Business intelligence firm and corporate bitcoin holder MicroStrategy acquired an additional 15,350 BTC for approximately $1.5 billion at an average price of $100,386 per bitcoin between Dec. 9 and Dec. 15, according to an 8-K filing with the Securities and Exchange Commission on Monday.

This acquisition follows the sale of an additional 3,884,712 MicroStrategy shares during the same period for the same amount. As of Dec. 15, the company reported that approximately $7.65 billion worth of shares remained available for sale as part of its planned $21 billion equity offering and $21 billion in fixed-income securities, targeting a total of $42 billion capital raise for further bitcoin acquisitions.

MicroStrategy now holds 439,000 BTC, worth over $45 billion. The company’s total holdings were bought at an average price of $61,725 per bitcoin, totaling around $27.1 billion, including fees and expenses, according to co-founder and executive chairman Michael Saylor. This represents approximately 2.1% of bitcoin’s total supply of 21 million.

The latest announcement marks the sixth week of purchases following news last Monday that the firm had acquired an additional 21,550 BTC for roughly $2.1 billion in cash at an average estimated price of $98,783 per coin.

Over the last six weeks, MicroStrategy has spent $17.5 billion on bitcoin, which accounts for around 39% of its total $45 billion position, with a market cap of $92 billion now trading at a significant premium to its bitcoin net asset value. Some investors have concerns regarding this premium and the strategy involving equity and debt-funded acquisitions.

However, Bernstein analysts believe this trend can persist, stating that as MicroStrategy continues to buy bitcoin, the valuation premium normalizes, with the bitcoin stock (denominator) appreciating. They noted that at 18% leverage levels based on convertible debt to bitcoin NAV, there is room for MicroStrategy to issue more debt, complementing its equity strategy. If bitcoin stays around the $100K range, they expect the company to keep acquiring.

MicroStrategy employs a key performance indicator termed “Bitcoin Yield” to measure the change in its bitcoin holdings relative to its diluted shares. As of Dec. 15, the firm’s year-to-date Bitcoin Yield is 72.4%, showcasing significant growth in holdings while considering share dilution due to the efficient acquisition strategy.

MicroStrategy shares closed up 4.2% at $408.67 on Friday, having increased over 490% year-to-date. The stock rose 3.5% in pre-market trading on Monday.

MicroStrategy Joins Nasdaq 100 Index

On Friday, it was announced that MicroStrategy will join the Nasdaq 100 index on Dec. 23. This inclusion implies that several large exchange-traded funds will buy the stock, with Bloomberg analyst James Seyffart estimating net buying of at least $2.1 billion in shares. MicroStrategy will be the 40th largest company in the Nasdaq 100, representing a 47 bps weight in the index, which also enhances MSTR’s market liquidity and bolsters its bitcoin buying program.

Analysts at Bernstein noted that due to the Nasdaq 100 inclusion, MicroStrategy is likely to continue selling its stock at current elevated levels to acquire more bitcoin. They described this strategy as a long-term, high-conviction “buy & hold” approach, envisioning a future where bitcoin surpasses gold, effectively exceeding $1 million per bitcoin.

The firms believe there is strong demand for bitcoin exposure in capital markets today, encompassing both equity and convertible debt markets. They anticipate MicroStrategy may explore other long-term funding options such as preference shares to further strengthen its balance sheet.

With MicroStrategy’s inclusion in the Nasdaq 100 and QQQ, Bernstein expects enhanced visibility and recognition, setting sights on inclusion in the S&P 500 by 2025. Inclusion in S&P 500 poses challenges due to the firm’s software business lacking profitability, but a recent accounting rule change for bitcoin valuations could enhance eligibility next year.

As the new mark to market guideline from FASB goes into effect in 2025, MicroStrategy may recognize its unrealized gains on its bitcoin positions, improving its chances of S&P 500 inclusion.