As a researcher with years of experience in blockchain technology and digital assets, I find Adam Back’s analysis on MicroStrategy (MSTR) intriguing and insightful. His perspective, rooted in his deep understanding of Bitcoin dynamics, provides valuable insights into the potential valuation of MSTR based on its significant Bitcoin holdings.
As an analyst, I’ve been closely watching the developments surrounding MicroStrategy (MSTR) after Adam Back, the CEO of Blockstream, expressed his views on the company’s valuation in relation to its substantial Bitcoin holdings on X (previously known as Twitter). On December 7, he emphasized the potential mispricing of the stock, the significance of maximizing Bitcoin per share, and the factors influencing the treasury premium.
As a researcher, I initially observed that MicroStrategy’s stock seems underestimated in my analysis. Currently, the value of 1,000 shares is estimated to be between 3.9 and 4.1 Bitcoins. However, I believe this valuation should be adjusted upward, ranging from 5.0 to 6.0 Bitcoins per 1,000 shares. This discrepancy suggests that the market has yet to fully account for MicroStrategy’s substantial Bitcoin holdings and potential future growth prospects.
Furthermore, he highlighted the idea known as the “treasury premium,” which he approximates at approximately 2 times right now, but anticipates might increase to between 2.5 and 3 times under specific circumstances. This premium symbolizes the extra worth that investors attribute to MicroStrategy’s tactic of using Bitcoin as a treasury resource.
According to Back’s viewpoint, factors like further Bitcoin purchases, being added to the S&P 500 index, and positive news about Bitcoin hitting new record highs could cause this premium to increase even more. Using these predictions and an estimated Bitcoin price of around $100,000, Back believes that MicroStrategy’s fair value per share could be between $485 and $585.
A key point Back emphasized is that increasing the BTC per share ratio is the most important metric for MicroStrategy’s success. He noted that every strategic decision should aim to maximize this ratio, as it determines how well the stock tracks Bitcoin’s price movements. To achieve this, he believes that MicroStrategy could take one of two approaches.
One option could be to sell new shares at a reduced asset value to collect funds for buying more Bitcoins when prices are lower, which should boost the Bitcoin-per-share ratio in the long run. The second strategy involves letting the asset value grow, providing the company with greater purchasing power but potentially facing higher Bitcoin costs during acquisitions. Back stated that while the approach may differ, what truly counts is the outcome, as MicroStrategy shares generally mirror Bitcoin’s price movements with a 1.5x multiplier, meaning they intensify Bitcoin’s price fluctuations.
To summarize, Back discussed the treasury premium and its fluctuations in various market situations. He pointed out that this premium tends to shrink during bear markets because MicroStrategy’s leverage restricts its capacity to generate funds through methods like at-the-market (ATM) offerings or convertible debt for a short period.
MicroStrategy’s share price closed at $395.01 on Friday, up 476.49% in the year-to-date period.
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2024-12-08 22:54