MSTR Stock Price Soars: The Transition from Business Intelligence to Bitcoin "Gold Shovel"

MicroStrategy (MSTR)'s stock price has risen from $69 at the beginning of the year to a high of $543 last week, significantly outpacing Bitcoin itself. It is noteworthy that while Bitcoin experienced a pullback due to certain events, MSTR continued to maintain a strong upward momentum. This phenomenon prompts us to re-examine its investment logic: MSTR is not merely capitalizing on the Bitcoin concept, but rather has its unique operational strategy.

The core strategy of MSTR: financing through convertible bonds to purchase Bitcoin.

MSTR was originally a company focused on business intelligence reporting systems, but this field has gradually declined. Today, its core strategy has shifted to raising funds through the issuance of convertible bonds, massively purchasing Bitcoin, and integrating it as an important component of the company's assets.

Convertible bonds are a special financing tool that allows investors to choose to recover their principal and interest at maturity or convert the bonds into company stock at an agreed price. If the stock price rises significantly, investors tend to convert to shares, leading to dilution of shares; if the stock price does not rise, the company must bear certain capital costs.

The operational logic of MSTR is as follows:

1. Use convertible bonds to raise funds to purchase Bitcoin.
2. In this way, the number of Bitcoins held by MSTR continues to increase, while the Bitcoin value per share is also growing.

For example, according to data from early 2024, the amount of Bitcoin corresponding to every 100 shares of MSTR increased from 0.091 to 0.107, and reached 0.12 by November 16.

In the first three quarters of 2024, MSTR increased its Bitcoin holdings from 189,000 to 252,000 through convertible bonds, a growth of 33.3%, while the total number of shares was diluted by only 13.2%. The number of Bitcoins corresponding to every 100 shares rose from 0.091 to 0.107, gradually increasing the equity in Bitcoin holdings.

As of November 16, MSTR announced the acquisition of 51,780 Bitcoin for $4.6 billion, bringing its total holdings to 331,200. At this rate, the Bitcoin value per 100 shares is approaching 0.12. From a coin-based perspective, MSTR shareholders' Bitcoin "equity" is continuously increasing.

MSTR: Bitcoin's "golden shovel"

The model of MSTR is similar to using Wall Street's leverage to "mine" Bitcoin:

• Continuously issuing bonds to purchase Bitcoin, increasing the per-share Bitcoin holdings by diluting shares.
• For investors, purchasing MSTR stock is equivalent to indirectly holding Bitcoin, while also enjoying leveraged gains from the stock price increase due to the rise in Bitcoin.

However, this model also faces some potential risks:

1. Fundraising difficulties may increase: If the stock price does not rise, subsequent convertible bond issuance may become difficult.
2. Over-dilution: If the speed of issuing additional shares exceeds the speed of Bitcoin accumulation, shareholder equity may shrink.
3. The model is being imitated: As more companies adopt similar strategies, the uniqueness of MSTR may weaken.

MSTR's future outlook and risks

In the long run, the accumulation of Bitcoin by large capital in the United States has strategic significance. Considering that the total amount of Bitcoin is only 21 million coins, the U.S. national strategic reserves may occupy 3 million coins. For large capital, "stockpiling coins" is not only an investment behavior but also a long-term strategic choice.

However, the investment risk of MSTR is currently high:

• If the Bitcoin price corrects, MSTR's stock price may suffer a greater decline due to leverage effects.
• The ability to maintain a high growth model in the future depends on fundraising capabilities and the market competition environment.

Investment Reflection

Looking back at 2020 when MSTR made its first large-scale purchase of Bitcoin, many investors believed that the Bitcoin price was already too high. However, MSTR continued to buy in large quantities even when the Bitcoin price reached $10,000, after which the Bitcoin price soared to $20,000. This event reminds us that the operational logic and market insight of American capital giants are worth learning from.

The model of MSTR may seem simple, but it reflects a strong belief in the long-term value of Bitcoin. Missing investment opportunities is not scary; the key is to learn from them and continuously improve one's investment understanding and judgment ability.