KEY POINTS
- Kerrisdale noted that "things have gotten carried away" during the Bitcoin bull run
- It said MSTR was trading "at an unjustifiable premium" to BTC, which drives the stock's value
- Despite MSTR's Thursday slump, the stock is still up year-to-date by 150%
Bitcoin maximalist Michael Saylor's MicroStrategy dropped as much as 14% Thursday after investment management firm Kerrisdale Capital said it was "short" on the business intelligence company, citing a potential overpricing of the MSTR stock.
"We are long Bitcoin and short shares of MicroStrategy, a proxy for Bitcoin which trades at an unjustifiable premium to the digital asset that drives its value," Kerrisdale said right at the beginning of its report published Thursday.
"Shares of MicroStrategy have soared amid a recent rise in the price of Bitcoin but, as is often the case with crypto, things have gotten carried away," Kerrisdale said in its short selling report. Short selling is a trading strategy wherein investors bet against a stock by selling borrowed stocks, hoping to buy back the shares for a lower price.
Kerrisdale pummeled the stock further, saying MSTR is "two and a half times the spot price of Bitcoin," but such a price is supposedly unreasonable since gone were the days when Tysons-based MicroStrategy "presented a rare, unique way to gain access" to the world's largest cryptocurrency by market cap.
It noted that BTC can now be easily obtained through various channels such as crypto exchanges and brokerages. "None of the reasons commonly provided for MicroStrategy's relative attractiveness justify paying well over double for the same coin," it argued.
MicroStrategy shares dived as much as 14% Thursday following the prominent short seller's report, but the stock remains up on a staggering 150% year-to-date.
Some traders and Bitcoiners seem unfazed about the short seller's report, as the crypto community on X (formerly Twitter), with some saying the report only pushed them to purchase more MSTR. "There's the reason nobody has heard of Kerrisdale Capital," one user said.
There is probably nothing more dumb than publishing your mid-curve trade idea to an army of irrational degens who will make it their life mission to liquidate you.
— OSF (@osf_rekt) March 28, 2024
I bought more $MSTR today.
— Samson Mow (@Excellion) March 28, 2024
Seems like a logical position to me, although markets can remain irrational longer than you can stay solvent, as they say.
— Trey Sellers ∞/21M (@ts_hodl) March 28, 2024
sounds like you don't understand the trade
— Julian Figueroa (@kinetic_finance) March 28, 2024
Buying more $MSTR after this report. #bitcoin
— ₿itWarrior ∞/21M 🌋⚡️🕳🐇🍊💊 (@bitwar21) March 28, 2024
You're shorting the 1% of companies that exited the dotcom bubble like a stud and has been printing cash ever since.
— chefdisco.eth ᵍᵐ 🍌 (@SoapBoxCar) March 28, 2024
If you can't "justify the premium" on something this simple, well there's the reason nobody has heard of Kerrisdale Capital
Kerrisdale's bearish view of the MSTR stock comes just more than a week after MicroStrategy acquired 9,245 more Bitcoin, bringing its total BTC holdings to 214, 246. MicroStrategy remains the world's known largest corporate holder of the world's first decentralized cryptocurrency and it has also announced it will transition into a "Bitcoin development company."
Last month, Saylor said it was only "natural" for MicroStrategy to make the transition since majority of the company's enterprise value is now based on its highly successful Bitcoin strategy. He went on to explain that in the rebranding, MicroStrategy will develop software "in order to accumulate more Bitcoin for our shareholders, and also to promote the growth of the Bitcoin network."
Meanwhile, BTC holds steady at around $70,000 following last week's slump in the lows of $62,000.
