December 13, 2024 was an historic day for not only MicroStrategy and its co-founder Michael Saylor, but also Bitcoin and the world. MicroStrategy was added to the Nasdaq-100, the Nasdaq index consisting of equity securities issued by 100 of the largest non-financial companies listed on Nasdaq.
By such inclusion, MicroStrategy gets into the Invesco QQQ trust, a popular index fund pegged to the Nasdaq-100. That means many retail investors will now be exposed to Bitcoin–through QQQ and MicroStrategy.
This moment must be special for Michael Saylor. With the company on brink of bankruptcy at the start of the pandemic, Saylor made one of the boldest decisions of any publicly traded company. He transformed his flagging business intelligence software company into a business that does primarily one thing: invests in Bitcoin. Hordes of it.
Here’s Saylor explaining to Dave Portney why he bet on Bitcoin:
But that’s not the only thing. The brilliance of MicroStrategy’s Bitcoin strategy is that its convertible bonds and debt, and publicly traded shares give other companies as well as retail investors a convenient way to get exposure to Bitcoin without investing in Bitcoin directly.
Why not invest in Bitcoin directly, you may ask?
Well, some companies and retail investors might not be able to buy Bitcoin, whether for legal or practical reasons. For example, some institutional investors might be able to buy MicroStrategy’s convertible bonds–putting it on their balance sheet–but not Bitcoin. And some retail investors might not have the capital to invest outside of their 401K or retirement accounts, which typically have pre-selected mutual funds offered by their employer’s retirement benefits.
Some investors may even prefer investing in MicroStrategy over Bitcoin due to being a leverage play on Bitcoin–meaning, at least in the short term, MSTR shares might yield higher returns. Bernard Zambonin explained this strategy in an informative article on November 24, 2024:
Notably, investors who purchased MicroStrategy shares instead of Bitcoin saw gains of 2,521% versus 1,156% for Bitcoin over five years.
MicroStrategy’s net asset value (NAV) in Bitcoin is 2.8x. This means that buying MicroStrategy shares implies paying a premium of 2.8 times the Bitcoin’s value. This premium reflects the added value of the company’s strategic approach and its ability to leverage Bitcoin’s price fluctuations for greater returns.
Bernard Zambonin
The Business Insider described the new metrics of how much exposure to Bitcoin one gets by buying MicroStrategy shares:
Bitcoin per share, and bitcoin value per share, reflect how many bitcoin investors are getting when they buy a share of MicroStrategy. The company owns 402,100 bitcoin, or 1.9% of the crypto’s supply limit of 21 million. So with a stock price of around $390, each MicroStrategy share gives investors exposure to 0.0017 bitcoin. That much bitcoin is worth $170, which is the bitcoin value per share. Therefore, the stock’s mNAV is 2.3x.
Jeff Park provides further analysis below: