MSTR CEO talks about being shorted: Citron doesn't understand where MSTR's premium over Bitcoin comes from
Michael Saylor stated that the company is profiting from volatile trading while also leveraging through ATM operations, so as long as Bitcoin continues to rise, the company can still make money, which is an important profit point that short sellers overlook.
Author: Li Xiaoyin, Wall Street Watch
MicroStrategy CEO Responds to Short Selling: The company currently earns $500 million a day and expects 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 media platform X, stating its intention to short "Bitcoin holding giant" MicroStrategy (MSTR). As a result, MicroStrategy's stock price plummeted, falling over 21% from its daily high.
On Friday, MicroStrategy Executive Chairman Michael Saylor appeared on CNBC's media program, where he responded that while the company profits from volatile trading, it also leverages through ATM operations, so as long as Bitcoin continues to rise, the company can still make money.
Wall Street Watch previously mentioned that ATM, or at-the-market issuance, refers to a public company gradually selling newly issued shares or shares they already own into 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 for Bitcoin, and its stock price has shown an unreasonable premium compared to the Bitcoin that drives its value, leading to significantly overheated trading, hence the decision to short MicroStrategy.
In this interview, Michael Saylor stated that short-selling firms believe that once the premium and equity disappear, the source of profit will also vanish. However, short sellers overlook an important profit point for MicroStrategy: the company invests in Bitcoin through leveraged financing, yielding high returns.
Saylor explained that the company relies on Bitcoin as a "reactor" to provide power, profiting from volatile trading on one hand, and on the other hand, financing through bond issuance to increase positions, borrowing to invest in Bitcoin via the ATM mechanism.
It is reported that the ATM model can flexibly raise funds , avoiding the significant discount issuance that occurs 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 relative to its Bitcoin holdings, creating arbitrage opportunities in financing.
Saylor stated, 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 an interest rate of 6%, when Bitcoin's price rises by 30%, we actually get an 80% Bitcoin price difference (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 can bring $125 in earnings per share over 10 years."
This means that as long as Bitcoin prices continue to rise, the company can keep making profits:
"Two weeks ago, we did $4.6 billion in ATM and traded at a 70% price difference, which means we made $3 billion in Bitcoin in five days. About $12.5 per share. If calculated over 10 years, the earnings will reach $33.6 billion, approximately $150 per share."
When discussing the risks that a potential drop in Bitcoin might bring, Saylor believes that investors who buy MicroStrategy's stock 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 and has become "the fastest-growing and most profitable company in America," expecting Bitcoin prices to rise 29% annually over the next 20 years, with the company's stock price rising 60% annually.
Since the beginning of this year, MicroStrategy's stock price has surged 516%, nearly four times the 132% increase in Bitcoin during the same period. In comparison, AI leader Nvidia has seen a cumulative increase of 195% this year.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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