Topline
Shares of MicroStrategy rallied Monday after the corporate bitcoin holder earned a spot in a key stock index, an apparent institutional vote of confidence in the company whose stock has been red hot amid the cryptocurrency boom.
MicroStrategy chairman Michael Saylor speaks at a 2021 conference.
Key Facts
MicroStrategy stock gained 4% at market open, enjoying a bump from the Nasdaq announcing after Friday’s close that the Virginia-based company would join its Nasdaq 100 stock index next Monday.
The inclusion on the Nasdaq 100, which is the basis for the popular Invesco QQQ exchange-traded fund, should result in about $2.1 billion in net buying of MicroStrategy shares as portfolios adjust to the move, according to Bernstein analyst Gautam Chhugani.
Also boosting the share price of MicroStrategy, which trades under the ticker MSTR, was a weekend rally for bitcoin, which hit a fresh all-time high Monday of over $106,000; almost all of MicroStrategy’s underlying value is tied to its bitcoin horde rather than a more traditional revenue-based business model.
MicroStrategy stock has gained a robust 573% in 2024, outstripping bitcoin’s 150% gain and the S&P 500’s 29% return.
Shares of the other two new Nasdaq 100 entrants, Axon Enterprise and Palantir, had less stark reactions, with Taser stun gun maker Axon stock up 1% and analytics-based defense contractor Palantir trading flat.
What Does Mstr Do?
MicroStrategy describes itself as the “world’s first and largest Bitcoin Treasury Company.” Part of the dot-com boom at the turn of the millennium, MicroStrategy shifted its focus beginning in 2020 from its software business to becoming the most prominent voice advocating for bitcoin as a long-term store of value akin to gold. The company owns 439,000 bitcoins in its strategic reserve, equivalent to $46 billion, or 2.2% of the world’s total bitcoin supply. Some 40% of MicroStrategy’s bitcoins have been acquired over the last 40 days, according to Chhugani, dating back to the election of Donald Trump, an outspoken bitcoin ally. MicroStrategy has taken the rare step of issuing debt to fund its bitcoin purchases. “If you are not a Bitcoin believer, this is scary, but MSTR’s Bitcoin strategy is a long term high-conviction ‘buy & hold’ strategy with the view to hold Bitcoin till it surpasses Gold and beyond,” Chhugani wrote Monday.
Contra
MicroStrategy certainly has its critics, including investment firm Citron Research, which announced a short position on MicroStrategy stock last month, calling the stock “overheated” and “completely detached” from bitcoin fundamentals. With a market capitalization of about $100 billion, MicroStrategy trades more than two times higher than its bitcoin holdings, with its other operations hardly offering much further support, as its software business brought in less than $120 million last quarter.
Big Number
2,700%. That’s how much MicroStrategy stock has returned over the last five years. That easily outranks the roughly 2,200% and 1,600% gains from the S&P’s top performers during that stretch in artificial intelligence darling Nvidia and Elon Musk-led electric vehicle company Tesla, respectively, according to FactSet.
Forbes Valuation
MicroStrategy’s outspoken founder and chairman Michael Saylor is worth more than $10 billion, making him the 254th-richest person in the world. His net worth has more than doubled since March.
