MicroStrategy (NASDAQ:MSTR) shares soared 58% in November following Bitcoin’s price surge and Donald Trump’s electoral victory. Despite a 20% pullback since then, MSTR has still skyrocketed an impressive 502% in 2024.
The company is doubling down on its Bitcoin strategy, announcing a $21 billion plan to finance the purchase of more cryptocurrency. However, one investor, Hataf Capital, believes this approach may be flawed. “While Bitcoin’s momentum is powerful, the fundamental disconnect between price and value has become too extreme to ignore,” Hataf argues.
Hataf points out that MSTR investors are paying $245,000 per Bitcoin, a 156% premium over its current market price of $95,600. This means each dollar invested in MSTR translates to only 39 cents of actual Bitcoin exposure, highlighting the steep premium embedded in the stock’s valuation.
Furthermore, MicroStrategy’s C Corporation status subjects any profits from its Bitcoin strategy to corporate tax, resulting in additional capital gains taxes for shareholders upon selling their shares. Hataf also warns that the company’s plan may dilute existing shareholders and burden it with significant interest obligations.
Despite this skepticism, Wall Street remains bullish on MSTR, with an 8 Buy recommendations and no Holds or Sells. However, Hataf Capital advises investors to consider alternative Bitcoin products, such as direct purchases or ETFs like IBIT, citing a Sell rating for MSTR shares.
Source: https://www.tipranks.com/news/time-to-jump-ship-says-investor-about-microstrategy-stock