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Analyst Calls MicroStrategy's Bitcoin Strategy 'Idiotic' as Equity Premium Erodes
Source: CryptoNewsNet Original Title: Bloomstran Says Saylor’s Bitcoin Strategy Is ‘Idiotic’ Original Link: MicroStrategy’s aggressive Bitcoin accumulation strategy has drawn criticism from veteran value investor Christopher Bloomstran, who argues the company’s latest moves have become “idiotic.”
Bloomstran contends that while the company’s earlier share issuance strategy was financially savvy arbitrage, the current situation has fundamentally changed. He notes that MicroStrategy’s market cap is now roughly 82% of the market value of its Bitcoin holdings.
The Core Issue: Dilution
For much of the bull run, MSTR shares traded at a massive premium to the actual Bitcoin on its balance sheet. When the stock was trading at 2.0x the value of its Bitcoin, the company could sell overvalued equity to purchase Bitcoin, creating “free” value for shareholders.
However, the dynamics have shifted. Issuing new shares to buy more assets when the equity is trading at a discount to the underlying Bitcoin holdings is mathematically dilutive. In essence, the company is selling a dollar for 82 cents to buy more of the asset it already owns.
Recent Acquisition
The critique follows the company’s announcement of another massive purchase: 1,229 BTC at approximately $88,568 per coin, pushing the firm’s average purchase price to nearly $75,000.