Historic Bitcoin Buy: MicroStrategy Adds 55,500 More BTC To Its Portfolio For $5.4 Billion

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As a seasoned analyst with over two decades of experience in the financial markets, I have witnessed numerous trends and strategies that have both propelled companies to new heights and led others to ruin. MicroStrategy’s Bitcoin acquisition strategy under Michael Saylor falls into an intriguing category – one that showcases the potential for financial arbitrage within corporate treasury structures.

In a move spurred by optimistic market conditions following Donald Trump’s election as president on November 5, the business intelligence corporation MicroStrategy has significantly amplified its Bitcoin (BTC) buying this month. This latest investment surge brings the company’s total Bitcoin holdings to approximately $38 billion.

Convertible Notes Fuel Massive Bitcoin Purchase

On November 25th, through social media posts, MicroStrategy’s co-founder, Michael Saylor, disclosed that the company had purchased 55,500 Bitcoins worth approximately $5.4 billion during the period between November 18th and November 24th.

This purchase was funded by proceeds from a $3 billion convertible note issuance and sales of common shares, as detailed in a filing with the US Securities and Exchange Commission (SEC).

Starting with Bitcoin purchases in 2020, Saylor has moved away from using only corporate cash and adopted a more intricate financing approach that includes selling convertible debt and shares instead.

In the most recent round, lenders chose a 0% interest rate on their convertible notes, indicating their belief that MicroStrategy’s share value will grow above the conversion price significantly in the forthcoming periods.

Jeffrey Park, who works as a portfolio manager at Bitwise Asset Management, pointed out that MicroStrategy, through its corporate treasury structure, has skillfully exploited financial arbitrage opportunities, essentially enabling them to obtain loans nearly for free.

As a researcher, I’m sharing an intriguing finding: MicroStrategy’s treasury operations have delivered a remarkable 59.3% return on Bitcoin investment so far this year. This translates to approximately 112,125 Bitcoins accumulated for shareholders, equating to around 341 Bitcoins per day.

If each Bitcoin (BTC) is valued at approximately $100,000, according to Saylor’s statement, it would translate to a significant $11.2 billion in annual revenue. This equates to around $34.1 million per day.

Analyst Warns Of Risks In Leverage Strategy

Ever since MicroStrategy first ventured into Bitcoin, it has amassed a total of approximately 386,700 tokens. Notably, the company’s average buying price for these tokens is significantly less than their current market worth.

The newest purchases took place as Bitcoin prices approached record levels. The company obtained these fresh tokens at around $97,862 per token, which was slightly higher than their current market value.

Yet, this leveraged approach has sparked worries within the financial community, especially following a 16% drop in MicroStrategy’s stocks (MSTR) on Thursday.

Experts caution that a sudden drop in Bitcoin’s value may negatively impact the company’s shares, reminiscent of the market crash in 2022 where Bitcoin and other cryptocurrencies suffered substantial losses.

Lance Vitanza, an analyst at TD Cowen, pointed out the potential risks of using leverage, explaining that when you increase your investment with leverage, the gains can be increased significantly, but so can the losses. He highlighted that MicroStrategy is particularly known for employing this leveraged approach, specifically in relation to Bitcoin.

Currently, the most prominent cryptocurrency is being traded at approximately $95,350, showing a 1.7% decline over the past 24 hours.

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2024-11-25 19:34