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A U.S. spot Bitcoin ETF could reduce MicroStrategy’s stock premium to Bitcoin, but the company’s stock will continue to offer some edge over such funds, some industry watchers say. .
Some investors have previously used shares of business intelligence company MicroStrategy as a kind of proxy for BTC, given the company’s vast assets.
MicroStrategy is the largest publicly traded holder of Bitcoin, holding a total of 189,150 BTC as of December 26th.
However, last week’s milestone launch of the Spot Bitcoin ETF gives investors a new access point to more easily gain BTC exposure.
read more: MicroStrategy stock has advantages over planned spot Bitcoin ETF: Saylor
Earlier this month, TD Cowen analyst Lance Vitanza predicted that the U.S. Spot Bitcoin ETF would significantly increase the price of Bitcoin and compress MicroStrategy’s trading premium to Bitcoin. “This will cause a significant rise in MSTR stock.”
MicroStrategy stock’s premium to Bitcoin could fall from around 40% to 15% to 25%, Vitanza added at the time.
As of Thursday’s market close, MicroStrategy stock had fallen 18.5% over the past five days. At the time, the price of Bitcoin had fallen by about 4.5% over that period.
Vitanza and fellow researcher Jonathan Navarrete wrote in a January 16 research note that while MicroStrategy’s bitcoin premium has declined with the launch of the ETF, the stock has its own merits.
“The chief among these benefits is that shareholders do not pay management fees. The company’s overhead costs are borne by the cash flow associated with operating the enterprise software business,” TD Cowen analysts wrote. Masu. “In fact, even after deducting corporate expenses, the company’s free cash flow effectively functions as a ‘reverse fee’ paid to shareholders rather than to them.”
TD Cowen values MicroStrategy’s operating software business at $1.25 billion, Vitanza and Navarrete note. MicroStrategy’s third quarter revenue from software licensing and subscription services was $45 million and $21 million, respectively.
Dan Weiskopf, co-portfolio manager of the Amplify Transformational Data Sharing ETF (BLOK), told Blockworks that MicroStrategy’s stock price has risen more than twice the price of Bitcoin in the last year. If you think about it, the recent decline in stock prices is “natural,” he said.
He believes MicroStrategy founder Michael Saylor and his team are smart about how they manage their capital structure and buy more Bitcoin, but the availability of a Spot Bitcoin ETF will make investing more difficult. He pointed out that it gives you more options for your home.
read more: BlackRock Beats Spot Bitcoin ETF Rival in Race to Win $1 Billion in Assets
“The question is whether investors who bought Bitcoin through MicroStrategy want to sell and pay up. [capital gains] Buy ETFs,” Weiskopf said. “Currently, valuation assuming 190,000 BTC at current prices and cheap debt seems interesting in the short term.”
The company launched a product in October designed to help organizations incorporate generative artificial intelligence into data applications.
“My question about MicroStrategy is where they’re going to take their software business and whether there’s a real AI kicker in the stock,” Weiskopf added.
read more: Bitcoin ETF Tracker
Balshire Capital Management founder Jeff Ross said on XSpace on Thursday that he believes Bitcoin miners and microstrategies are likely to outperform BTC during the upcoming bull market. said.
“As a client, I’ve stuck with Bitcoin miners, but even more so with MicroStrategy,” Ross said. “I think [Saylor] He does a great job of knowing when his stocks are high, distributing more stocks to the market, and taking that cash to buy Bitcoin. He…knows when to borrow money at low interest rates to buy more Bitcoin. ”
MicroStrategy announced in August that it had entered into sales agreements with Cowen and Company, Canaccord Genuity, and Berenberg Capital Markets to sell up to $750 million in equity in one or more companies. Chief Financial Officer Andrew Kang said the company could use the proceeds for “general corporate purposes” such as purchasing more Bitcoin.
Vitanza and Navarrete said in a Jan. 16 research note that they expect any future reductions in the company’s premium to Bitcoin to be offset by higher BTC prices.
read more: Analysts focus on gold to gauge Bitcoin spot ETF impact
Industry participants said they expect Bitcoin prices to rise as adoption of spot Bitcoin ETFs increases, coinciding with Bitcoin’s next halving.
They further said, “We believe the significant premium remains justified given MicroStrategy’s lack of management fees, organic Bitcoin growth…use of intelligent financial leverage and downside protection.” added.
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