According to U.Today, Lionel Laurent, a Bloomberg Opinion columnist, has expressed skepticism about the long-term viability of MicroStrategy's strategy of using debt to acquire Bitcoin. Laurent highlighted that Citron Research's disclosure of a short position in the company previously led to a significant drop in its share price. Despite this, MicroStrategy has recently emerged as one of the top 100 largest public companies in the United States, competing with major corporations like Intel.
MicroStrategy's valuation has surged approximately 50 times since it adopted Bitcoin as its treasury reserve asset. The company's approach involves leveraging inexpensive debt to generate funds for further Bitcoin acquisitions. Recently, MicroStrategy completed a $3 billion offering of convertible notes, and its Bitcoin holdings have surpassed the $30 billion mark. However, Laurent warns that this bold strategy carries substantial risks, with a potential Bitcoin price crash being the most apparent threat. Such a downturn could force the company to sell assets and record write-downs.
Even if Bitcoin maintains its value, MicroStrategy might still face challenges due to its significant premium relative to its net asset value (NAV). Michael Saylor, the company's CEO, is known for his resilience in the face of financial setbacks, having previously lost $6 billion in a single day in 2000. Despite the growing skepticism, Saylor remains undeterred. He acknowledged the existential risk of Bitcoin experiencing an extinction-level event and losing all its value overnight. However, he emphasized that MicroStrategy's investors are aware of and have accepted this risk.
