MicroStrategy (NASDAQ) shares surged 12% on Tuesday as the price of Bitcoin rose after the holiday. Described as an aggressive investor in Bitcoin, the company has amassed a total of 331,200 BTC, paid for at an average of $88,627 each, which makes up about 1.57% of the total Bitcoin supply.
The firm started its Bitcoin journey back in 2020 when it was treated as an inflationary hedge and as part of treasury diversification. It bought Bitcoin at $49,874 per coin and went on to continue making its purchases, massively averaging up its holdings. To fund future purchases, the firm has announced a plan to raise $1.75 billion in zero-convertible notes that mature in 2029. It also outlined a bigger plan to raise $42 billion over the next three years.
The approach seems to be working well, with MicroStrategy’s shares up by more than 509% year-to-date, thereby passing Bitcoin’s 107% year-to-date increase in the same period. In five years, the company’s share has jumped by 2,398%, outperforming the rise of Bitcoin by 1,148% in the same period.
However, gains in MicroStrategy are not sustainable, some analysts say, but simply in line with Bitcoin’s performance. While the company reported a net income of $429 million, its operational income was just a modest $804,000, while much of its reported profit could be traced to a huge tax benefit of $553.6 million, which many see as a slippery slope.
Although MicroStrategy’s financial situation very much parallels the catapult in Bitcoin’s stock, it is uncertain whether its Bitcoin-centric strategy will ultimately succeed. The risks must be weighed carefully before the investment decision on whether to bet on the company’s shares or on Bitcoin itself.
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