MicroStrategy's Bitcoin Strategy Boosts Stock Performance

According to Cointelegraph, MicroStrategy's aggressive Bitcoin (BTC) acquisition strategy has been a significant factor in the company's stock performance. An analyst report from Sept. 24 suggests that the company should consider generating yield by lending out a portion of its Bitcoin holdings. Benchmark fintech analyst Mark Palmer indicated that MicroStrategy's stock, MSTR, could reach $215 per share if the company continues to leverage its balance sheet to buy more BTC and starts lending out the digital currency for low-risk yield. Currently, MSTR shares trade at around $153 following a 10-for-1 stock split on Aug. 9. MicroStrategy, primarily an enterprise software company, has seen its public market valuation driven largely by its Bitcoin holdings, which it began accumulating in 2020. On Sept. 18, executive chairman Michael Saylor mentioned in a podcast that Bitcoin could become a form of 'perfected capital,' serving as a store of value and generating low-risk yield through digital banking services like lending and borrowing. Despite concerns about MSTR's valuation, which trades at a premium to the value of its BTC holdings, Saylor believes that the company's Bitcoin acquisition strategy justifies this premium. During its Aug. 1 earnings call, MicroStrategy committed to a unique performance metric called Bitcoin yield, which measures the ratio of BTC holdings to outstanding shares, effectively setting BTC-per-share as a key performance indicator. On Sept. 20, MicroStrategy completed a $1.01 billion convertible note offering, using the proceeds for Bitcoin purchases and debt repayment. A portion of the proceeds was used to retire $500 million of 6.125% senior secured notes due 2028, freeing up 69,080 bitcoins previously pledged as collateral. This move creates new opportunities for MicroStrategy, especially with the growing number of institutional cryptocurrency custodians in the United States and increasing institutional interest in crypto as an asset class. Palmer's Sept. 24 note suggests that with the SEC's increased flexibility regarding digital assets and major institutions' interest in the crypto space, MicroStrategy may soon have large institutional counterparties to which it could lend a portion of its bitcoins with a high degree of certainty that those loans would be repaid.