BTC has been rising all the way, and MicroStrategy has become the strongest US stock.
Author: shaofaye123, Foresight News
On November 21, Hindenburg Capital issued a tweet claiming to short MicroStrategy's stock. On one side is the Wall Street legend short-seller, and on the other side is the strongest US stock in 2024. Is Hindenburg Capital going to lose again? This article will give you an understanding of the stories behind these two legendary companies.
Hindenburg Capital, the short-selling giant, has always been a magical presence in the capital market, with its presence in multiple cycles. In 2012, it shorted Qihoo 360 and Sohu, damaging its reputation. In 2021, it was forced to cover its short position in GameStop. In 2022, it even shorted Ethereum with a market capitalization of $130 billion.
Since Hindenburg Capital announced its short position on MicroStrategy yesterday, MicroStrategy's stock price has plummeted, falling 30% from its daily high at one point.
Hindenburg Capital's Short-Selling History
Hindenburg Capital, a major short-selling institution in the US, was founded in 2001. In 6 years, it targeted 20 Chinese concept stocks, causing 15 of them to plummet more than 80% and 7 to be delisted. At that time, Hindenburg Capital was in its prime and began to short Evergrande. In its report, it wrote, "Evergrande's fate is already sealed, the only uncertainty is the timing." Eventually, Evergrande collapsed, confirming Hindenburg's prediction.
Hindenburg was unrivaled at that time. In 2021, GameStop came into the sights of major institutions for shorting. As the world's largest game retail chain, GameStop's offline game business seemed to have been abandoned by the market and its market share was being taken away by major companies. It seemed that the short-sellers would win again. But the emergence of the "Roaring Kitty" staged a spectacular short squeeze on Wall Street. The identity behind "Roaring Kitty" was Keith Gill, but no one knew at the time. Under the fermentation of "Roaring Kitty" and WSB, retail investors pushed the stock price from $19.95 to double at $39.91. Hindenburg Capital, seeing the severely overvalued stock price, couldn't sit still. On January 19, it officially issued a short report on GME and cursed the retail investors who bought at high prices as fools. Retail investors fought back, and with Musk's tweet "Gamestonk!" on Twitter, the stock price once soared to $483. In this battle, Hindenburg Capital lost 100% and exited at $90, while another capital Melvin Capital also lost as much as $6.8 billion.
After this incident, Hindenburg issued a statement saying it would abandon its 20-year short research and no longer issue short reports, and would shift its focus to providing long trading opportunities for individual investors, seemingly marking the end of the short-selling institution era. Major capitals were all defeated, and the retail investors' battle against Wall Street seemed to have achieved the final victory, but Robinhood's action of pulling the plug caused the stock price to plummet rapidly. In the GME incident, it was still the victory of the few.
Afterwards, Hindenburg did not stop shorting as it said. In 2022, it shorted Ethereum with a market capitalization of $130 billion, and now Ethereum's market value has tripled.
MicroStrategy, the Strongest US Stock in 2024
MicroStrategy, a more legendary company than Hindenburg Capital, is a top-level conspiracy.
MicroStrategy was founded in 1989 by Michael Saylor, Sanju Bansal, and Thomas Spahr. Initially, MicroStrategy was just a consulting company focused on multi-dimensional modeling and simulation. When Saylor was young, he was not optimistic about Bitcoin, and even mocked virtual currencies in 2013. But since 2020, MicroStrategy has started exploring alternative assets other than cash, using its financial assets to purchase over 121,000 Bitcoins, gradually becoming the world's largest publicly traded company holder of Bitcoin. MicroStrategy has systematically invested heavily in Bitcoin, including taking on debt to increase its Bitcoin holdings. Currently, the listed company with the most Bitcoin holdings globally, in just two years, has achieved a paper profit of over $15 billion and a trading volume exceeding the highest level of Nvidia on the US stock market.
So what is MicroStrategy's strategy? How did it leverage such huge benefits?
Simply put, the current MicroStrategy is a company that specializes in purchasing BTC. By buying Bitcoin, it drives up the price of Bitcoin, and its own stock price also rises accordingly. It then borrows again to buy more Bitcoin, the price of Bitcoin rises again, and the stock price continues to rise, and it can raise funds again to buy more Bitcoin, and the stock price keeps rising, and its net asset value and earnings per share also keep rising...
This flywheel model inevitably reminds people of Luna, whose collapse event has always left people uneasy. In addition, MicroStrategy is currently trading at a 300% premium to Bitcoin, and MSTR investors are actually paying $250,000 per Bitcoin, while the market price is less than $100,000. Its stock price also has a certain premium.
Short or Long, Win or Lose?
In this opportunity, Hindenburg Capital stepped in again. On November 21, it tweeted:
Four years ago, Hindenburg was the first to tell readers that MicroStrategy (MSTR) was the ultimate way to invest in Bitcoin, setting a target of $700.
Fast forward to today: MSTR has soared to over $5,000 (adjusted). Hats off to Michael Saylor's visionary Bitcoin strategy.
Now, with Bitcoin investment becoming easier than ever, MSTR's trading has completely divorced from Bitcoin's fundamentals. While Hindenburg remains bullish on Bitcoin, we have hedged our position by shorting MSTR.
We have great respect for Saylor, but even he must know MSTR is overheated.
In fact, Hindenburg is not the first institution to suggest hedging a long Bitcoin position by shorting MSTR. In March this year, another well-known institution, Kerrisdale Capital Management, also made a similar suggestion, saying it would go long on Bitcoin but short MSTR's stock.
The short-sellers are back in action, and MicroStrategy's stock price has plummeted. Is it another Hunter family or a continued rise? Is it market foresight or another mistake?
Looking at the data, the trading volume of MSTZ (2x inverse MSTR ETF) rose on November 21, with a single-day trading volume approaching $1.53 billion, compared to a previous daily average of $84 million. From a fundamental perspective, MicroStrategy is now trading at a 300% premium to Bitcoin, and with the passage of the ETF, buying BTC will become more convenient. In the long run, MSTR may lose its "unique premium".
However, there are still many supporters (source: @0x_Todd) who are optimistic about MSTR, saying:
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- MicroStrategy is not Luna, its safety cushion is much thicker. According to recent statistics, MicroStrategy's average cost of Bitcoin is $49,874, which is currently close to 100% in unrealized gains, which is an extremely thick safety cushion.
- MicroStrategy increases its Bitcoin holdings through bonds and stock sales. MicroStrategy borrows off-exchange leverage without a margin call mechanism. The angry creditors can only convert their bonds into MSTR shares at the designated time and then angrily dump them into the market.
- The latest debt repayment date is in February 2027, more than two years away. Even if MSTR is crushed to zero, it still does not need to be forced to sell these Bitcoins, because the earliest debt it borrowed needs to be repaid by February 2027.
- The only soft threat currently is the Bitcoin whales, and the whales are more inclined to present a win-win situation.
So, is MicroStrategy's crazy selling of Bitcoin a top-level strategy to spiral up to a market cap of $1 trillion, or is it a dance that will ultimately end? Time will give the answer.
