MicroStrategy’s (NASDAQ:MSTR) wild ride hit a speed bump Thursday, as the stock plunged 16% to $397.28 following a bold call from Citron Research. Citron, once a fan of MicroStrategy’s Bitcoin-fueled strategy, announced a short position, claiming the stock has become untethered from Bitcoin’s fundamentals. Much respect to Michael Saylor, but even he must know $MSTR is overheated, Citron posted on X, referencing the company’s executive chairman. With Bitcoin ETFs and platforms like Coinbase making crypto investing more accessible, the case for owning MSTR as a Bitcoin proxy is looking shakier.
Despite the sell-off, MicroStrategy’s year-to-date gains remain jaw-dropping, up over 500% thanks to Bitcoin’s meteoric rise to $98,000 range after the U.S. election. The company’s aggressive playbookdubbed the 21/21 strategyhas fueled its Bitcoin buying spree, financed by around $9 billion in recent equity and debt offerings. But Citron’s critique underscores a big risk: MicroStrategy’s valuation depends on maintaining a hefty premium to Bitcoin, which now accounts for about $32 billion of its market cap. The stock briefly hit a $100 billion valuation this week but has since dropped back to $89 billion, raising questions about whether this rally has run its course.
Here’s the dilemma for investors: with Bitcoin investment options exploding, does MicroStrategy still justify its sky-high multiple? Citron’s not the first to hedge its Bitcoin bets by shorting the companyothers have made the same play, citing concerns over the stock’s detachment from crypto fundamentals. For now, MicroStrategy remains the most daring Bitcoin play on Wall Street, but as Citron’s move highlights, that ride isn’t for the faint-hearted.
This article first appeared on GuruFocus.
