Is There An End To MicroStrategy’s (MSTR) Bitcoin Madness?

MicroStrategy continues to grow its Bitcoin holdings. Just last week, the company purchased another 2,138 bitcoins, taking its total to an astonishing 446,400 coins. At today’s Bitcoin prices, this translates into a staggering value of 41.51 billion USD, making itself a leader in Bitcoin investment.

MicroStrategy is a US-based company that provides cloud, Business Intelligence (BI), and software development services. It develops real-time dashboards and software that process the big data of its clients.

The company has, however, shifted its focus to purchasing Bitcoin. To arrange funds for financing these purchases, the company continues to sell its own shares. Prior to last week’s buying, it also bought 5,262 bitcoins at an average price of $106,662 between 16 to 22 December 2024. After the recent shopping spree, the company’s total holdings have reached 446,400 bitcoins.

The firm’s 21/21 plan, which plans to raise $21 billion each from selling fixed-income securities and its own shares, continues to drive its future strategy. It is clear that the company is extremely bullish on Bitcoin. Its share price has rallied over 360% this year, far outperforming even Bitcoin’s price surge. But where does this bullishness end?

By concentrating its portfolio in Bitcoin, the company is taking a huge risk. Bitcoin continues to be volatile and there is a good chance that a lot of good news as a consequence of Trump’s election victory is already priced in. Moreover, the company is taking this risk by raising capital rather than using cash. This amplifies the risk, especially when the company can better use the cash to improve its main line of business. It is clear that the priority lies elsewhere, and no investor would want to invest in a management that ignores its own business.

There is some optimism that easing regulation and institutional adoption of Bitcoin will bring manifold returns for MicroStrategy. There’s no denying that this could someday materialize, but we believe it is not worth the risk at current elevated price levels.

MicroStrategy Inc. (NASDAQ:MSTR) is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held MSTR at the end of the third quarter which was 26 in the previous quarter. While we acknowledge the potential of MSTR as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as MSTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Story Continues