MicroStrategy Stock Price Soars: In-Depth Analysis of Bitcoin Investment Strategy

Since the beginning of this year, MicroStrategy's stock price has soared from $69 to $543, outpacing even Bitcoin. While Bitcoin has fallen due to market volatility, MicroStrategy has continued to rise, prompting a reevaluation of its investment logic. Clearly, the company is not merely leveraging the Bitcoin concept but has its own unique operational strategy.

MicroStrategy's core strategy: issuing convertible bonds to purchase Bitcoin

MicroStrategy originally focused on business intelligence reporting systems, but has now shifted its focus. Currently, its core strategy is to raise funds through the issuance of convertible bonds, to buy Bitcoin on a large scale, and to make it an important part of the company's assets.

Convertible bonds are a special financing instrument. Investors can choose to receive principal and interest upon maturity, or convert the bonds into company stock at a predetermined price. If the stock price rises significantly, investors may choose to convert to equity, leading to dilution of shares; if the stock price does not rise, the company must pay a certain cost of funds.

The operating logic of MicroStrategy is:

1. Use the funds raised from issuing convertible bonds to purchase Bitcoin.
2. In this way, the company's Bitcoin holdings continue to increase, while the Bitcoin value per share is also growing.

For example, based on data from early 2024, the amount of Bitcoin corresponding to every 100 shares increased from 0.091 to 0.107, and by November 16, it reached 0.12.

In the first three quarters of 2024, MicroStrategy increased its Bitcoin holdings from 189,000 to 252,000 (a growth of 33.3%), while the total number of shares was only diluted by 13.2%. The number of Bitcoins corresponding to every 100 shares rose from 0.091 to 0.107, gradually increasing the equity in Bitcoin holdings.

According to the latest data, as of November 16, MicroStrategy announced the acquisition of 51,780 Bitcoin for $4.6 billion, bringing its total holdings to 331,200. At this trend, the Bitcoin value corresponding to every 100 shares is approaching 0.12. From a coin-based perspective, MicroStrategy shareholders' Bitcoin "equity" is continuously increasing.

MicroStrategy: Bitcoin's "golden shovel"

From a pattern perspective, MicroStrategy's strategy is similar to using Wall Street's leverage to "mine" Bitcoin:

• Continuously issuing bonds to purchase Bitcoin, increasing the per-share Bitcoin holdings by diluting shares.
• For investors, purchasing MicroStrategy shares is equivalent to indirectly holding Bitcoin, and they can also enjoy leveraged gains from the stock price increase due to Bitcoin rising.

This model is somewhat similar to a Ponzi scheme, using newly raised funds to subsidize the rights of old shareholders, and maintaining operations through continuous fundraising.

However, this model may face the following risks:

1. Increased difficulty in fundraising: If the stock price does not rise, subsequent convertible bond issuance may become difficult.
2. Excessive dilution: If the speed of issuing new shares exceeds the speed of Bitcoin accumulation, shareholder equity may shrink.
3. Homogenization of the model: If more companies follow this model, MicroStrategy's uniqueness may be lost.

MicroStrategy's Logic and Future Risks

Although MicroStrategy's strategy is controversial, in the long run, the accumulation of Bitcoin by large capital in the United States may have strategic significance. Considering that the total supply of Bitcoin is only 21 million, the national strategic reserves of the United States may occupy 3 million. For large capital, "coin hoarding" is not just an investment behavior, but a long-term strategic choice.

However, the current risks of MicroStrategy may outweigh the benefits:

• If the price of Bitcoin pulls back, MicroStrategy's stock price may suffer a larger decline due to leverage effect.
• Whether it can continue to maintain a high growth model in the future depends on fundraising ability and the market competition environment.

Conclusion

The case of MicroStrategy provides us with a valuable learning opportunity. Although its model is simple, it reflects a strong belief in the long-term value of Bitcoin. This reminds us to closely monitor market trends and continually update our investment knowledge and strategies. In the rapidly changing financial market, it is crucial to maintain an open mindset and a spirit of continuous learning.