Shares of MicroStrategy fell Tuesday after Citibank reportedly downgraded the business intelligence firm for its “disproportionate” Bitcoin focus.
Citi analyst Tyler Radke issued a ‘sell’ rating on MSTR shortly after the company announced it would raise more money to buy Bitcoin (BTC). Radke says CEO Michael Saylor’s “disproportionate focus on bitcoin” puts investors in significant risk, especially after an “overextended” rally since September.
MSTR’s bitcoin investment has returned $ 250 million (or $ 26 / share or + 20% worth of shares) since August ’20. While impressive, it pales in comparison to the stock’s 172% return. At the current stock price, our analysis suggests that the market is using much more optimistic valuation scenarios for the core businesses and Bitcoin. “
MicroStrategy’s stock price has been climbing since August, when the company first announced its Bitcoin game. Many investors view MSTR as an indirect investment in Bitcoin given the company’s vast digital currency reserves.
On Monday, MicroStrategy disclosed plans to allocate an additional $ 400 million to its Bitcoin treasury. To do this, the company plans to issue $ 400 million in convertible senior notes. As Cointelegraph reported$ 400 million would increase the company’s Bitcoin reserves by more than 20,800 BTC.
MicroStrategy is by far the largest Bitcoin business holder. It is currently has 40,824 BTC on the books, with a total value of $ 2.75 billion.
Institutional investors and companies are turning to Bitcoin as a hedge against inflation and dollar instability. Saylor has compared his company’s cash reserves for a “melting ice cube” as the US dollar’s purchasing power continues to decline. He believes asset inflation will grow to more than 20% per year.