MicroStrategy’s recent Bitcoin buying spree has significantly boosted its stock performance, and according to a report by Benchmark fintech analyst Mark Palmer, the company should consider generating yield by lending out a portion of its Bitcoin holdings. If MicroStrategy continues to leverage its balance sheet to buy more BTC and starts lending out the digital currency for low-risk yield, its stock, MSTR, could be valued at $215 per share. Currently, MSTR trades at around $153 after a stock split in August. Although MicroStrategy’s core business is enterprise software, its public market valuation primarily comes from its BTC holdings, which it began accumulating last year.
In a podcast on September 18, MicroStrategy’s executive chairman, Michael Saylor, stated that Bitcoin could serve as a “perfected capital” that acts as a store of value and generates low-risk yield through digital banking services like lending and borrowing.
Despite concerns about MSTR’s valuation, Saylor believes that the premium at which the stock trades is justified due to the flywheel effect of MicroStrategy’s Bitcoin acquisition strategy.
During its August 1 earnings call, MicroStrategy emphasized its commitment to BTC buying by introducing the unique performance metric of Bitcoin yield. This metric measures the ratio of BTC holdings to outstanding shares, effectively setting BTC-per-share as a benchmark for corporate performance.
On September 20, MicroStrategy completed a $1.01 billion convertible note offering, using the proceeds for Bitcoin purchases and debt repayment. Palmer mentioned that a portion of the proceeds was used to retire $500 million of senior secured notes due in 2028.
Palmer believes that these developments create opportunities for MicroStrategy, particularly with the increasing number of institutional cryptocurrency custodians in the US and growing institutional interest in crypto as an asset class. He suggests that with the SEC’s flexibility regarding digital assets and the interest from major institutions, MicroStrategy may soon have access to large institutional counterparties to whom it can lend its bitcoins with a high degree of certainty of loan repayment.
Overall, MicroStrategy’s Bitcoin strategy has been instrumental in driving its stock performance, and the company could potentially benefit further by exploring lending opportunities with its Bitcoin holdings.