MicroStrategy is transforming itself from a simple software company into a new kind of financial institution. More than a company holding bitcoin, it becomes the very first investment bank dedicated to this cryptocurrency, with a potential valuation that is dizzying: between 690 billion and 3 trillion dollars.
MicroStrategy's strategic shift
MicroStrategy is disrupting all the codes of traditional finance, as evidenced by Allianz's bet on the company and Bitcoin. The company has developed a unique approach: acting as a sophisticated financial intermediary between traditional capital markets and the Bitcoin ecosystem. His method is based on the issuance of financial securities backed by BTC.
This unique position is reflected in impressive figures. The company now holds 279,420 bitcoins, or 1.3% of all bitcoins in circulation. This massive concentration gives it a competitive advantage almost impossible for other market players to reproduce.
MicroStrategy Executive Chairman Michael Saylor's strategy goes well beyond simple asset accumulation. The company positions itself as a true “Bitcoin Company”multiplying initiatives to promote institutional adoption of cryptocurrency.
MicroStrategy: a revolutionary economic model
The genius of MicroStrategy lies in the apparent simplicity of its business model. The company captures the difference between bitcoin's compound annual growth rate and its cost of capital. Historically, the BTC posts annual growth above 50%, while MicroStrategy can raise funds at near-zero rates thanks to its convertible bonds.
This approach completely transforms the traditional financial reading of the company. Bitcoin purchases should no longer be seen as simple investments, but as real turnover. This perspective radically changes the analysis of company valuation. For the year 2024 alone, this disguised “turnover” generated more than $5 billion in gross profits.
MicroStrategy's adjusted price-to-earnings ratio is around 14a level comparable to large traditional investment banks. This comparison becomes even more favorable when we take into account the $6.7 billion in unrealized accumulated revenue, with 100% profit margins.
Sophisticated financial engineering
MicroStrategy doesn't just buy and hold BTC. The company has developed unique expertise in the creation of financial products adapted to different investor profiles.. By breaking down the risk/return profile of bitcoin, it can offer tailor-made financial instruments: common shares, convertible bonds, potential preferred shares, and even structured products.
This ability to absorb and redistribute the volatility of bitcoin is a major asset. MSTR, the company's stock, acts as a volatility dampenermaking it possible to offer investors exactly the level of risk and return they seek. This sophisticated financial engineering allows in particular to issue convertible bonds at rates close to zero.
Dizzying growth prospects
MicroStrategy's ambitions are dizzying. The company plans a colossal fundraising of $42 billion over three years to continue its acquisitions of bitcoins. At an average of 14 billion per year, the company could double its current profits, even using very conservative assumptions on its cost of capital.
This growth is based on a unique competitive advantage. No other company can currently compete with MicroStrategy in its role as a Bitcoin investment bank. Its first mover position, combined with its massive bitcoin reserve, creates a virtually insurmountable barrier to entry for potential competitors.
Rigorous risk management
Despite its extraordinary potential, MicroStrategy's strategy is not without risks. The company remains fundamentally linked to the success of bitcoin. A prolonged drop in the price of cryptocurrency could endanger its ability to honor its convertible obligations, particularly if the share price falls below the conversion price.
Regulatory risk is another concern, although it appears limited in the current political environment. Restrictive legislation on the use of securities issues for the purchase of BTC could theoretically hinder the business model of the company, although this scenario seems unlikely.
Regular dilution of shareholders also represents an important point of attention. The frequent capital increases necessary to finance BTC purchases imply that share price growth will always be lower than market capitalization growth.
MicroStrategy's impact on the market
MicroStrategy's influence on the BTC market continues to grow. Each massive purchase by the company permanently removes bitcoins from circulation, creating upward pressure on prices. This strategy of permanent accumulation, combined with the absolute scarcity of bitcoin, could have considerable implications on the future valuation of the cryptocurrency.
MSTR's exceptional performance itself becomes a powerful marketing argument. The stock has outperformed every S&P 500 stock since its Bitcoin strategy began in 2021. This success is forcing CFOs and institutional investors to reconsider their exposure to bitcoin, otherwise they risk underperforming their benchmark indices.
MicroStrategy redefines the traditional boundaries between classic finance and the world of cryptocurrencies, carrying the strategic vision of Michael Saylor. By positioning itself as the go-to intermediary for institutional exposure to bitcoin, the company could become one of the most powerful financial players of tomorrow. The story of MicroStrategy reminds us that the greatest financial innovations often come from questioning established models.
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Satosh
Every day, I try to enrich my knowledge about this revolution which will allow humanity to advance in its conquest of freedom.
