Author: Li Xiaoyin, Wall Street Journal
MicroStrategy CEO responds to short-selling: The company currently earns $500 million a day, and is expected to see its stock price rise 60% annually over the next 20 years.
Last Thursday during the US stock market trading session, the well-known short-selling institution Citron Research posted on the social media platform X that it planned to short "the Bitcoin holding giant" MicroStrategy (MSTR), causing MicroStrategy's stock price to plummet, at one point falling more than 21% from the day's high.
On Friday, MicroStrategy Executive Chairman Michael Saylor appeared on a CNBC media program, where he responded by saying that while the company is profiting from the volatility, it is also leveraging through ATM operations, so as long as Bitcoin continues to rise, the company can still make money.
Wall Street Journal previously mentioned that ATM, or at-the-market, refers to a public company gradually selling newly issued shares or their existing shares to the secondary market at the current market price through a designated broker.
MSTR's premium is largely due to the ATM mechanism
Previous tweets show that Citron believes MicroStrategy's stock has become an alternative investment to Bitcoin, and its stock price has an unreasonable premium compared to the Bitcoin that drives its value, with the trading being significantly overheated, and therefore decided to short MicroStrategy.
In this interview, Michael Saylor stated that the short-sellers believe that once the premium and equity disappear, the source of profit will also disappear, but they have overlooked an important profit point of MicroStrategy: the company earns high returns by leveraging its investment in Bitcoin through financing.
Saylor explained that the company relies on Bitcoin as a "reactor" to provide power, on the one hand profiting from volatility trading, and on the other hand, borrowing to increase its position through the ATM mechanism.
It is reported that the ATM model can flexibly raise funds, avoiding the significant discount in traditional financing, which is particularly suitable for high-volatility stocks like MicroStrategy. At the same time, MicroStrategy's high trading volume makes large-scale stock sales possible, and its market capitalization has a 2.8 times premium over its Bitcoin holdings, creating arbitrage opportunities in financing.
Saylor stated that through the ATM operation, MicroStrategy transfers the volatility, risk and performance of fixed-income assets to common stocks, allowing the company to obtain returns far higher than the cost of borrowing and the rise in Bitcoin.
"If we invest in Bitcoin with financing at an interest rate of 6%, when the price of Bitcoin rises 30%, we actually get an 80% Bitcoin spread (a function of stock premium, conversion premium and Bitcoin premium)."
"The company has issued $3 billion in convertible bonds, and based on an 80% Bitcoin spread, this $3 billion investment can bring $125 per share in earnings over 10 years."
This means that as long as the price of Bitcoin continues to rise, the company can continue to profit:
"Two weeks ago, we did a $4.6 billion ATM and traded at a 70% spread, which means we made $3 billion in Bitcoin in five days. About $12.5 per share. If calculated over 10 years, the earnings will reach $33.6 billion, about $150 per share."
When discussing the potential risks of a Bitcoin downturn, Saylor believes that as long as investors have purchased MicroStrategy's stock, they have already accepted the risk of a possible Bitcoin downturn - to get a 2x return, you have to take on the corresponding risk.
Saylor further stated that the company is currently earning $500 million a day, and has become the "fastest growing and most profitable company in America", and he expects Bitcoin prices to rise 29% annually and the company's stock price to rise 60% annually over the next 20 years.
So far this year, MicroStrategy's stock price has soared 516%, nearly 4 times the 132% rise in Bitcoin during the same period, compared to a 195% cumulative increase in the AI leader Nvidia's stock this year.
