Bitcoin up, MicroStrategy down over past 30 days

MicroStrategy (MSTR) traders returned from their holiday break to disappointing returns on their leveraged bitcoin (BTC) stock.

Over the past month, BTC has rallied 3% while MicroStrategy has declined 12%. This is despite founder Michael Saylor’s boasts of a 74.3% “bitcoin yield” for shareholders on a dilution-adjusted basis for the 2024 fiscal year. This includes his recent addition of 1,070 BTC to the company’s stack.

As MicroStrategy’s tiny software business has declined to a de minimis portion of its market capitalization, investors value the firm based almost entirely on its BTC holdings. As of publication time, the company holds $45 billion worth of BTC but its market cap is $88 billion — 93% higher.

Investors call this 1.93X multiplier MicroStrategy’s “Net Asset Value premium,” “NAV multiple,” or simply “mNAV.”

Despite the generous premium, this multiple has been declining since November 20. In part, the company recently increased the number of authorized shares of Class A common stock from 330 million to an eye-watering 10.3 billion.

Although the stock dipped slightly on that drastic expansion of supply, investors believe that the dilution will mostly be used to purchase BTC for the benefit of shareholders.

MicroStrategy’s bitcoin-gobbling shareholder dilution

Fighting back against what would otherwise be viewed as negative reports of dilutive share offerings, MicroStrategy bulls are casting the play as a way for Saylor to leverage corporate paper to increase BTC holdings per share.

For example, one narrative about corporate bond traders’ desire for volatility supposes that MicroStrategy can justify a persistent premium to its BTC holdings. Some bullish investors think MicroStrategy’s premium can regain or exceed its 3.4X high.

Some hyperbullish traders even think that this mNAV can somehow rally to double digits.

In any event, the company has announced a variety of corporate paper products to buy BTC on leverage, including this week’s $2 billion of newly-announced ‘perpetual preferred stock’ that will offer senior privileges to existing Class A common stock. Still, the company is trading 34% below its all-time high.