Author: Li Xiaoyin, Wall Street Watch
MicroStrategy CEO responds to short-selling: the company currently earns $500 million a day, expecting the stock price to rise 60% annually over the next 20 years.
Last Thursday during U.S. stock trading, the well-known short-selling agency Citron Research posted on social media platform X that they intended to short 'Bitcoin holding giant' MicroStrategy (MSTR), resulting in a significant drop in MicroStrategy's stock price, which fell over 21% from its daily high.
On Friday, MicroStrategy Executive Chairman Michael Saylor appeared on CNBC's media program, during which he responded that while the company profits from volatility trading, it also leverages through ATM operations, so as long as Bitcoin continues to rise, the company can still make money.
As previously mentioned by Wall Street Watch, ATM, or at-the-market offerings, refers to a public company gradually selling new shares or shares it already owns to the secondary trading market at the current market price through designated brokers.
Most of MSTR's premium comes from the ATM mechanism
Previous tweets indicated that Citron believes MicroStrategy's stock has become an alternative investment to Bitcoin, with its stock price showing an unreasonable premium compared to the Bitcoin that drives its value, indicating significantly overheated trading, leading to the decision to short MicroStrategy.
Michael Saylor mentioned in this interview that short-sellers believe that once the premium and equity disappear, the source of profits will also vanish, but short-sellers overlook an important profit point for MicroStrategy: the company invests in Bitcoin through leveraged financing, obtaining high returns from it.
Saylor explained that the company relies on Bitcoin as a 'reactor' to provide power, profiting through volatility trading on one hand, and on the other hand, leveraging through bond financing and using the ATM mechanism to borrow and invest in Bitcoin.
It is reported that the ATM model allows for flexible fundraising, avoiding the significant discount issuance common in traditional financing, making it particularly suitable for high-volatility stocks like MicroStrategy. Additionally, MicroStrategy's high trading volume makes large-scale stock sales possible, and its stock market value has a 2.8 times premium relative to its Bitcoin holdings, creating arbitrage opportunities in financing.
Saylor stated that through ATM operations, MicroStrategy transfers the volatility, risk, and performance of fixed income assets to common stock, allowing the company to achieve returns far exceeding borrowing costs and Bitcoin price increases.
If we invest Bitcoin with financing at a 6% interest rate, when Bitcoin's price rises by 30%, we actually receive an 80% Bitcoin price difference (a function of stock premium, conversion premium, and Bitcoin premium).
The company issued $3 billion in convertible bonds, and based on an 80% Bitcoin price difference, this $3 billion investment could bring $125 per share in returns over 10 years.
This means that as long as Bitcoin prices continue to rise, the company can continue to make profits:
Two weeks ago, we executed $4.6 billion in ATM and traded at a 70% price difference, which means we earned $3 billion in Bitcoin within five days. Approximately $12.5 per share. If calculated over 10 years, the returns will reach $33.6 billion, or about $150 per share.
When discussing the risks that a decline in Bitcoin might bring, Saylor believes that as long as investors purchase MicroStrategy's stock, they implicitly accept the risk of a potential drop in Bitcoin—if one wants double returns, they must bear the corresponding risks.
Saylor further stated that the company currently earns $500 million a day and has become 'the fastest-growing and most profitable company in America', expecting Bitcoin prices to rise 29% annually over the next 20 years, and the company's stock price to rise 60% each year.
Since the beginning of this year, MicroStrategy's stock price has surged by 516%, nearly four times the 132% increase in Bitcoin during the same period, while AI leader Nvidia has seen a cumulative increase of 195% this year.
