Strategy (Nasdaq: MSTR), the Business Intelligence Company based in SAAS previously known as Microstrategy that was a pioneer in a Bitcoin Treasury strategy, currently a market capitalization of $ 73 billion is currently quoted, ~ 1.6 times the value of his underlying holdings of Bitcoin. This so -called “mstr” has caused many misunderstandings, healthy skepticism and even dismay, but with a decade of experience in deep actions, we believe that there are three reasons why the Mstr cousin is justified. These are particularly valid during periods of increasing Bitcoin prices, as we are now.
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Graphic: Mstr to Christmas premium
Source: Mstr tracracker.com, GSR
First, the strategy acquires leverage when issuing capital and debt to invest income in Bitcoin, gaining the difference between Bitcoin’s yield and its capital cost (that is, “carry”). It is important to highlight that the strategy gains this transport not only this year, but also in the future years, and investors simply are worth the current value of this expected future and include it in Mstr market capitalization.
In fact, this is an important reason why Mstr will fluctuate with the expectations of the market of future yields of Bitcoin. However, the first reason why MSTRizes with a premium to his BTC holdings is that investors get the future BTC to take the present.
Second, the strategy monetizes the issuance of intelligent capital markets for the benefit of shareholders. It activates the value through the issuance of convertible debt, where not only is it paid to offer similar to Bitcoin to the bond market, but also for the volatility inherent to its actions as convertible arbitraces of bonds earn more money with an underlying asset More volatile. In addition, MSTR issues equity, mainly through money capital issues in money, with a prima value to book value, which by definition is accumulated for shareholders. In fact, capital issuance with twice book value is equivalent to selling $ 1 for $ 2, or on the contrary, buy BTC with a 50% discount. This is how the strategy could generate a 74% increase in the amount of its Bitcoin retained by action last year, equivalent to 140,630 BTC, or $ 14 billion of value for shareholders.
Finally, the entire construction takes advantage of the Nascence of Bitcoin and Crypto, the fact that cryptocurrencies are in secular expansion and that the price of Bitcoin has tended to increase over time.
For those who are not yet convinced, we offer the following thought experiment: if I had a Magic bank account with $ 100 USD to pay you an interest rate of 69%, how much money would you pay for for that? While the response can vary from person to person, it is likely that it is much more than $ 100, which means that the bank account would be negotiated with a premium to its Usd underlying (that is, NAV).
This is exactly what is happening with MSTR, since its BTC has increased per action at an annual rate of 69% since it began to invest in Bitcoin in August 2020. This increase in BTC per action (that is, in performance in kind) is greater during the bull. Markets and lower during the bearish markets, but has generally increased over time. And while there is no guarantee that the strategy continues to increase its BTC per action in the future, MSTR guide for an increase of 15%+ this year and 6-10% in each of the following two years.
Risks abound, of course: MSTR investors assume the basic risk for the price of BTC and the action tends to move more than Bitcoin in both addresses. In relation to the premium, the premium can go up or down in the future, and the actions will probably be negotiated with a discount (that is, below the value of their Bitcoin holdings) during the bears markets. But the premium exists because investors believe that Mstr will continue to increase the amount of their bitcoin per action in the future, and are willing to pay for that now.
Graph: Mstr’s increase in Bitcoin per action (that is, Bitcoin performance)
Source: Mstr tracracker.com, GSR
