MicroStrategy Stock Soars 1200% Thanks to Bitcoin
MicroStrategy Inc. (MSTR) has seen its stock skyrocket by 1200% since it started adding Bitcoin (BTC/USD) to its balance sheet. This impressive growth outpaces even the returns of tech giant NVIDIA Corporation (NASDAQ: NVDA), making MicroStrategy’s story worth exploring.
The Big Move
On August 10, 2020, MicroStrategy made a bold decision. It became the first publicly listed company to adopt Bitcoin as its primary reserve asset. This means the company decided to hold Bitcoin instead of traditional assets like cash. Since then, MicroStrategy’s stock has surged by nearly 1200%, outdoing even NVIDIA’s impressive 950% gain.
Why Bitcoin?
MicroStrategy’s co-founder Michael Saylor highlighted the reason behind this strategy during the firm’s second-quarter earnings call. The company wanted to escape the slow growth of being a non-big tech company. Initially, the goal was to track Bitcoin’s performance, but it evolved into outperforming Bitcoin itself. Since adopting Bitcoin, MicroStrategy’s stock returns have even outpaced Bitcoin’s own 488% increase.
MicroStrategy vs. Bitcoin and NVIDIA
It’s interesting to note that while MicroStrategy’s stock soared, Bitcoin’s price increased by 488% during the same period. This means MicroStrategy not only outperformed other companies but also the very asset it invested in. NVIDIA, another tech giant, saw a 950% increase, which is impressive but still less than MicroStrategy’s growth.
Second-Quarter Earnings
Despite the soaring stock, MicroStrategy reported lower-than-expected revenue for the second quarter. The company brought in $111.4 million, a 7.4% decrease from Q2 2023, and below analysts’ expectations of $119.3 million. However, the firm’s gross profit was $80.5 million.
Bitcoin Holdings and Impairment Losses
As of the latest update, MicroStrategy holds 226,500 BTC, worth over $14 billion at current prices. The company faced significant impairment losses due to Bitcoin’s price fluctuations, leading to a second consecutive quarterly loss. The carrying value of its Bitcoin holdings was $5.68 billion, with cumulative impairment losses of $2.64 billion. The original cost basis was $8.33 billion, with an average cost per Bitcoin at $36,798.
Bitcoin Yield KPI
To measure the performance of its Bitcoin strategy, MicroStrategy introduced a new Key Performance Indicator (KPI) called “Bitcoin Yield.” This KPI represents the percentage change period-to-period of the ratio between the firm’s Bitcoin holdings and its Assumed Diluted Shares Outstanding. The 2024 BTC Yield is 12.2% year-to-date, and the company aims for an annual BTC Yield of 4-8% from 2025-2027.
Equity Offering and Stock Split
MicroStrategy raised $800 million through 2.25% convertible senior notes due 2032 and redeemed $650 million in convertible senior notes due 2025. Additionally, the company announced a new $2 billion at-the-market equity offering program. To make its shares more accessible to smaller investors, MicroStrategy plans a 10-for-1 stock split, as announced by Michael Saylor.
Closing
MicroStrategy’s bold move to adopt Bitcoin as its primary reserve asset has paid off significantly. The company’s stock has soared by 1200%, outpacing both Bitcoin’s and NVIDIA’s gains. Despite facing impairment losses and reporting lower-than-expected revenue, MicroStrategy remains committed to its Bitcoin strategy, aiming to achieve positive Bitcoin Yield in the coming years. With new equity offerings and a planned stock split, MicroStrategy continues to adapt and grow in the ever-evolving financial landscape.
Under the leadership of Michael Saylor, MicroStrategy has positioned itself as a market leader in integrating Bitcoin into its corporate strategy. Saylor’s bold vision and commitment to Bitcoin have not only driven substantial stock gains but also set MicroStrategy apart from other tech companies. His consistent advocacy for Bitcoin and transparent communication about the company’s strategic goals inspire confidence among investors. By investing in MicroStrategy, potential shareholders align themselves with a company led by a visionary CEO who is dedicated to pioneering innovative financial strategies and driving long-term value through strategic Bitcoin investments.
Potential investors might consider buying MicroStrategy stock because of its strong association with Bitcoin. Since adopting Bitcoin as its primary reserve asset, MicroStrategy has seen a dramatic increase in its stock value, rising by 1200%. This impressive performance suggests that the company’s strategy of holding and acquiring Bitcoin can yield significant returns, especially as the cryptocurrency market continues to grow. Investors who believe in the long-term value and potential appreciation of Bitcoin might see MicroStrategy as a viable way to gain exposure to the digital asset.
