Bitcoin-Proxy MicroStrategy Shows Hodler Discount in Selloff
(Bloomberg) -- One enterprise-software maker’s stock slide might smell like opportunity for Bitcoin bulls handy with a calculator.
The recent plunge in the price of the world’s largest cryptocurrency has taken the momentum out of MicroStrategy Inc. shares, which became a proxy for Bitcoin after CEO Michael Saylor began amassing the digital tokens last summer. And at one point Tuesday, Bitcoin’s slide to below $29,000 helped take MicroStrategy’s stock down as much as 12%. Shares closed 5% lower on Tuesday at $553.72.
For hardcore Bitcoin hodlers buying MicroStrategy purely for the cryptocurrency exposure, meant they could’ve effectively snapped up the tokens at a $21-discount.
The Tysons Corner, Virgin.-based company has become legendary for opening the backdoor to investing in Bitcoin. Since MicroStrategy’s first blush with the cryptocurrency, it has issued two sets of convertible bonds and more recently, tapped the high-yield bond market in order to buy more. Now its pile is 105,085 coins.
With 7.78 million shares outstanding that equates to 0.013 Bitcoin per share. So at a recent price of about $33,000, you’d be getting the MicroStrategy Bitcoin at $446, based on Bloomberg’s back-of-the-envelope calculation.
The calculation considered further dilution, but avoided convertibles to show what a new investor today would be getting in Bitcoin. Class B and other potentially dilutive shares are not included int the shares outstanding figure.
At today’s share price of $560, less the $135 share price before the company’s foray into Bitcoin, its stash alone -- outside MicroStrategy’s core software business -- is worth $425. Given that a new investor is getting the equivalent of $446 of Bitcoin, they are getting a $21 discount or nearly 5% off the going price of Bitcoin.
So if Bitcoin enthusiasts liked MicroStrategy shares when Bitcoin was $49,000, effectively paying a $284 per share premium for them, they should love it all the more now.
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