Microstrategy has already made more in stock price appreciation than they risked buying Bitcoin!

in LeoFinance •  9 days ago 

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Who doesn't like a good ol fashioned risk-free investment?

That is essentially what Microstrategy is doing with their bitcoin investment.

If you haven't heard by now, they initially invested $250 million into bitcoin several weeks back, announcing it would make up a significant amount of their treasury assets.

More on that can be seen here:

https://hive.blog/hive-167922/@jrcornel/possible-watershed-moment-for-bitcoin-as-microstrategy-swaps-fiat-for-bitcoin-as-company-s-reserve-asset

Then, more recently they announced that they had invested another $175 million into bitcoin, bringing their total investment to $425 million in BTC.

Which based on the time of their purchases amounts to them holding roughly .2% of the entire supply of bitcoin...

Wowza.

Anyways, getting to my point...

Can you spot the exact moments on the chart that MSTR announced that they bought bitcoin with their cash holdings?

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(Source: https://stockcharts.com/h-sc/ui)

I'll give you a hint, pay special attention to the red arrows above...

As you can see, both times that Microstrategy announced they were buying bitcoin, their stock price went crazy.

How crazy you may be wondering?

Well, just doing to some quick napkin math, we are about to find out!

MSTR adds $701 million in stock price appreciation...

We can see that from the time of the first announcement, MSTR was trading for around $123 per share.

Since that time, it has added roughly 41% to date.

Not too shabby for several weeks of trading!

But this is where things get really interesting...

Take a look at the total market cap of MSTR currently:

image.png

(Source: https://finance.yahoo.com/quote/MSTR/)

It's worth roughly $1.7 billion.

If we subtract that 41% gain that the stock price has seen since the bitcoin announcements, we can subtract roughly $701 million from the current market cap.

Why is that number interesting to me?

Well, MSTR has ONLY invested roughly $425 million into bitcoin currently, yet they have gained roughly $701 million in terms of stock appreciation.

That means currently they have already made more in stock appreciation than they risked on the entire bitcoin investment!

Not sure about you, but that's what I would call a win-win type of investment.

The CEO of MSTR is either going to go down as one of the smartest CEO's to ever live, or one of the dumbest.

As it stands right now, it's got a risk-free investment working quite nicely for him!

Stay informed my friends.

Image Source:

https://finance.yahoo.com/quote/MSTR/

-Doc

Posted Using LeoFinance

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Mindblowing. Talk about hedging your bets... other corporations would be foolish not to follow suit as the dominoes drop.

Posted Using LeoFinance

If I was them I would do a stock offering real quick here to take advantage of this current premium and also reduce your risk with the BTC holding ;)

This mechanic may also go in the other direction. When BTC dumps also shares of MSTR may suffer considerably. To me it looks more like a risk acceleration than risk-free investment. Anyway, if more companies enter the game, the downward-risk on both sites decreases. Thank you for the nice read.

Yes there is that as well. Good point. However, my point was that not only did their market cap go up by the amount they were risking, it went up about 75% MORE than that. The smart play for them would be to sell some stock at this point and reduce their risk. ;)

It clearly pays to be one of the first movers!

Yep, I think we are going to see a lot of companies start doing this. At least with some of their cash. Shareholders will start demanding it.

Sure, and it will actually draw some new customers for them too

Wow

Those are my favorite kinds of investments!

Good catch, the CEO probably is spending his yearly bonus in his mind already. Ha Ha
Good for them!