[MicroStrategy’s Bitcoin strategy comes under scrutiny]
MicroStrategy, which holds more than 250,000 Bitcoins, has a market capitalization of $170 billion and a stock valuation of $430 billion, continues to issue new shares to raise money to buy Bitcoin despite carrying $42.5 billion in debt. This strategy, known as the “infinite money loophole,” is similar to Grayscale Bitcoin Trust’s premium trading pattern in the past, but its long-term robustness remains in question.
Since adopting its Bitcoin strategy, MicroStrategy has raised $44 billion in five equity increases, attracting investors and boosting the stock's book value. However, the $430 billion valuation far exceeds its net asset value (NAV), similar to the speculative boom in previous Bitcoin cycles, causing confusion among market analysts.
The company's co-founder, Michael Saylor, is controversial in the crypto industry and has been criticized for his stance against privacy technology and Bitcoin developers, but his bold strategies have helped to popularize Bitcoin. Grayscale founder Barry Silbert also attracted attention due to the "New York Agreement" controversy.
MicroStrategy's $42.5 billion in outstanding bonds and multiple conversion options further complicates its valuation, and the company has cash liabilities to deal with on four interest-paying bonds. However, the cash flow from its software business is sufficient to cover interest payments, and even if Bitcoin prices fluctuate, it is not enough to force the company to sell off assets.
Zero-coupon bonds pose special risks because holders have no cash redemption rights in the absence of significant changes, increasing vulnerability to market fluctuations. The current stock price has exceeded the bond conversion threshold, further complicating bondholders' choices and making future development more challenging.
