Author: Li Xiaoyin, Wall Street Journal
MicroStrategy CEO responds to the short selling: the company currently earns $500 million a day, expecting its stock price to rise 60% annually over the next 20 years.
Last Thursday during U.S. stock trading, the well-known short-selling firm Citron Research posted on social platform X stating its intention to short 'Bitcoin holder' MicroStrategy (MSTR), causing MicroStrategy's stock price to plummet, falling more than 21% from its daily high.
On Friday, MicroStrategy Executive Chairman Michael Saylor appeared on a CNBC 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.
The Wall Street Journal previously mentioned that ATM refers to issuing/increasing shares at market price, meaning that listed companies gradually sell newly issued shares or shares they already own to the secondary trading market through designated brokers at the current market price.
The premium of MSTR mainly comes from the ATM mechanism
Earlier tweets indicated that Citron believes MicroStrategy's stock has become an alternative investment to Bitcoin, and its stock price has shown an unreasonable premium compared to the value driven by Bitcoin, with significant trading overheating; thus, they decided to short MicroStrategy.
In this interview, Michael Saylor stated that short-selling institutions believe that once the premium and equity disappear, the source of profit will also disappear, but short-sellers overlook an important profit point for MicroStrategy: the company leverages its investment in Bitcoin through financing, obtaining high returns from it.
Saylor explained that the company relies on Bitcoin as a 'reactor' to provide power, profiting from volatility trading on one hand, while on the other hand financing through bond issuance to increase positions, borrowing to invest in Bitcoin through the ATM mechanism.
It is reported that the ATM model allows for flexible fundraising, avoiding the significant discount issuance typical in traditional financing, making it particularly suitable for high-volatility stocks like MicroStrategy. Meanwhile, MicroStrategy's high trading volume makes large-scale stock sales possible, with its stock market value having a 2.8 times premium compared to its Bitcoin holdings, creating arbitrage opportunities in financing.
Saylor stated that through ATM operations, MicroStrategy transfers the volatility, risks, 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 funds financed at an interest rate of 6% in Bitcoin, when the price of Bitcoin rises by 30%, we actually receive an 80% price difference in Bitcoin (a function of the combined 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 in earnings per share over 10 years."
This means that as long as the price of Bitcoin continues to rise, the company can continue to profit:
"Two weeks ago, we executed a $4.6 billion ATM and traded at a 70% price difference, which means we earned $3 billion in Bitcoin within five days. About $12.5 per share. If calculated over 10 years, the returns will reach $33.6 billion, approximately $150 per share."
When discussing the risks that may arise from the decline of Bitcoin, Saylor believes that as long as investors purchase MicroStrategy's stock, they implicitly accept the risk of Bitcoin potentially declining—if they want double the returns, they must bear the corresponding risks.
Saylor further stated that the company currently earns $500 million a day, has become 'the fastest-growing and most profitable company in the U.S.', and expects Bitcoin prices to rise by 29% annually over the next 20 years, with the company's stock price rising by 60% each year.
So far this year, MicroStrategy's stock price has skyrocketed by 516%, nearly four times the 132% increase of Bitcoin in the same period; in comparison, AI leader Nvidia has accumulated a 195% increase this year.
