MicroStrategy (NASDAQ:MSTR) shares blasted 58% in November, buoyed by Bitcoin’s latest worth surge, with Donald Trump’s electoral victory additional fueling the rally. Even with a 20% pullback since November 20, MSTR has nonetheless skyrocketed an eye-popping 502% in 2024.
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At this level, the corporate is just not exhibiting any signal that it intends to maneuver away from Bitcoin. On the opposite, MSTR has not too long ago introduced its 21/21 plan, whereby the corporate will elevate $21 billion of each debt and fairness to finance the acquisition of extra Bitcoin.
Should these bullish on Bitcoin be loading up on MSTR? One investor recognized by the pseudonym Hataf Capital thinks this could be a really unhealthy concept.
“While the cryptocurrency market’s momentum is highly effective, notably within the wake of Trump’s victory, the basic disconnect between worth and worth has change into too excessive to disregard,” argues the investor.
Hataf factors out that MSTR buyers are successfully paying $245,000 per Bitcoin – a staggering 156% premium over Bitcoin’s present market worth of $95,600. This means every greenback invested in MSTR interprets to solely 39 cents of precise Bitcoin publicity, highlighting the steep premium embedded within the inventory’s valuation.
Hataf additionally raises considerations about MicroStrategy’s C Corporation standing, which topics any earnings from its Bitcoin technique to company tax. Shareholders would then face further capital features taxes upon promoting their shares.
“When these features are mirrored within the inventory worth and shareholders promote their shares they’ll pay further capital features tax on their inventory appreciation,” says the investor, including that there are different Bitcoin merchandise which possess extra tax environment friendly constructions.
Adding to the skepticism is the potential affect of the 21/21 plan. Hataf warns that issuing $21 billion in fairness would dilute present shareholders, whereas taking over $21 billion in debt would burden the corporate with important curiosity obligations.
“For buyers in search of bitcoin publicity, I like to recommend both direct bitcoin purchases or ETF alternate options like IBIT,” Hataf concludes, assigning a Sell ranking to MSTR shares. (To watch Hataf Capital’s monitor report, click on right here)
Hataf’s pessimism doesn’t appear to be mirrored on Wall Street. With 8 Buy suggestions and no Holds or Sells, MSTR boasts a Strong Buy consensus ranking. Its 12-month common worth goal of $494 implies ~30% upside from present ranges. (See MSTR inventory forecast)
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Disclaimer: The opinions expressed on this article are solely these of the featured investor. The content material is meant for use for informational functions solely. It is essential to do your personal evaluation earlier than making any funding.
