Hedge Fund Bets on Bitcoin, Against MicroStrategy Over Valuation Concerns
Kerrisdale Capital goes long on Bitcoin, short on MicroStrategy due to valuation doubts
Today, Kerrisdale Capital announced its strategy: they're investing in Bitcoin while betting against MicroStrategy shares. Their reasoning? They believe MicroStrategy's stock price far exceeds its real value based on its Bitcoin assets.
Kerrisdale pointed out that MicroStrategy's stock price implies a Bitcoin value way above its actual market price. They argue that the reasons given for MicroStrategy’s high market valuation don't justify the excessive price.
Since August 2020, under CEO Michael Saylor, MicroStrategy has made Bitcoin its main investment, accumulating over 214,000 BTC.
However, Kerrisdale believes that MicroStrategy's software business has become insignificant compared to its Bitcoin holdings, contributing little to the company's overall worth.
The hedge fund also scrutinized MicroStrategy’s financial strategies, like using debt and offering more shares, which increased its Bitcoin stash but also diluted its Bitcoin per share.
Kerrisdale predicts a potential 50% drop in MicroStrategy’s stock if the premium on its shares adjusts to more typical levels.
The investment community's response varied, with some agreeing with Kerrisdale's logic and others warning against the unpredictability of the market. Critics especially highlighted the risk of announcing such a strategy in a volatile market.
Kerrisdale Capital's move puts the spotlight on how companies like MicroStrategy, with significant cryptocurrency investments, are valued.
It’s a bold statement on the valuation disconnect between company stocks and their cryptocurrency assets, sparking debate among investors and analysts alike.
