Key insights

• 💰 Micro Strategy's market cap is inflated due to its Bitcoin holdings, raising questions about its valuation and rationale for investment
• 🔍 Comparing Micro Strategy's pricing to the Black Rock Spot Bitcoin ETF is a common consideration
• ⚖️ iBit's market cap closely reflects the value of its Bitcoin holdings, preventing arbitrage opportunities
• 💵 MicroStrategy can acquire cash for buying Bitcoin through earning it from their legacy software business, borrowing money, or selling new shares
• 📈 Selling new shares can provide cash but may dilute shareholders, buying back shares can increase value for shareholders
• 🍏 Companies like Apple and Pfizer have different approaches to shares, affecting their stock prices
• 🚀 MicroStrategy outperforms big tech companies despite issuing more shares
• ⏫ MicroStrategy's stock price is driven by expectations of higher Bitcoin price and accumulation of more BTC over time

Q&A

• How does Micro Strategy's stock performance compare to companies like Apple and Pfizer despite issuing more shares?

  Micro Strategy has been issuing more shares, yet its stock performance has been surprisingly strong, outperforming big tech companies like Apple. This indicates that despite the increase in shares outstanding, Micro Strategy's stock has shown resilience and robust performance.

• What are the implications of selling new shares, buying back shares, and issuing new shares for companies and their shareholders?

  Selling new shares provides fresh cash but may dilute shareholders, while buying back shares can increase value for shareholders. Companies like Apple have demonstrated the positive impact of buying back shares on profit growth and stock performance, while others, such as Pfizer, have been affected by issuing more shares.

• How does Micro Strategy acquire cash for buying Bitcoin and what are the associated risks?

  Micro Strategy can acquire cash for buying Bitcoin through its legacy software business, borrowing money, or selling new shares. However, the company's low operating cash flow prompts a reliance on borrowing or issuing new shares, posing a risk of excessive debt and financial instability.

• How is Micro Strategy different from iBit in terms of pricing and arbitrage opportunities?

  iBit's market cap closely reflects the value of its Bitcoin holdings, preventing arbitrage opportunities, thanks to the actions of authorized participants. In contrast, Micro Strategy shares are not redeemable for BTC, allowing the company's stock to trade at a premium or discount to its BTC holdings.

• How does Micro Strategy's pricing compare to the Black Rock Spot Bitcoin ETF?

  Micro Strategy's stock price is often compared to the Black Rock Spot Bitcoin ETF as both reflect the value and potential growth of Bitcoin. The comparison helps investors assess the premium or discount associated with investing in Micro Strategy for its Bitcoin holdings.

• Why would someone buy Micro Strategy stock at a premium for its Bitcoin holdings instead of acquiring Bitcoin directly or through a Bitcoin spot ETF?

  Micro Strategy holds a substantial amount of Bitcoin, and the stock price is driven by expectations of higher Bitcoin prices and accumulation of more BTC over time. This could appeal to investors who believe in the long-term potential of Bitcoin but prefer the convenience of owning stock in a company with significant Bitcoin holdings.

• 00:00 📊 Micro Strategy holds a significant amount of Bitcoin, but the company's market cap appears to be inflated due to its Bitcoin holdings. This raises questions about the valuation and the rationale for investing in the company compared to buying Bitcoin directly.
• 02:21 Microsoft's high PE reflects expectations of rapid earnings growth. MicroStrategy's stock price is driven by expectations of higher Bitcoin price and accumulation of more BTC over time. Comparing MicroStrategy's pricing to the Black Rock Spot Bitcoin ETF is a common consideration.
• 04:18 The market cap of iBit closely reflects the value of the Bitcoin it holds, preventing arbitrage opportunities. iBit is closely tied to its net asset value due to the actions of authorized participants. In contrast, MicroStrategy shares are not redeemable for BTC, so the company has the freedom to trade at a premium or discount to its BTC holdings.
• 06:30 MicroStrategy can acquire cash for buying Bitcoin through earning it from their legacy software business, borrowing money, or selling new shares. The company's operating cash flow is relatively low, so they rely more on borrowing or issuing new shares to obtain the cash. However, taking on too much debt poses a risk.
• 08:28 Selling new shares of stock can provide fresh cash but may dilute shareholders. Companies often choose to buy back shares to increase value. Apple has been buying back shares, leading to profit growth and stock performance. Some companies opt to issue new shares.
• 10:29 Companies like Apple and Pfizer have different approaches to shares, affecting their stock prices. MicroStrategy has been issuing more shares but its stock performance has been surprisingly good.