We were pleased to be featured extensively in a Forbes article earlier this week regarding our short position in MicroStrategy (MSTR). Despite having plummeted along with the rest of the cryptocurrency ecosystem we believe it still has much further to fall.
MSTR has made a ~$3b windfall on its bitcoin purchases. However, its market cap has increased by roughly $9b. While nonsensical, this massive premium is unsurprising, given the froth in the cryptocurrency market and the paucity of publicly listed vehicles for bitcoin speculation… We calculate the fair value of MSTR shares to be $450 at current bitcoin prices. It trades at nearly $1000.
However, pivoting the business into a massive levered bet on a no-yield, infinite-duration, purely speculative asset at the very peak of speculative mania turned out to be not such a great idea.
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