Bitcoin ETF Approval Impact on MicroStrategy Tactics

Bitcoin ETF Approval

As the financial world buzzes with anticipation of Bitcoin exchange-traded funds (ETFs) becoming a reality, MicroStrategy’s approach to buying Bitcoin, spearheaded by Chairman Michael Saylor, may face new scrutiny. The company initiated its Bitcoin acquisitions in 2020 to diversify away from cash amidst fears of inflation. This shift coincided with a period of flat growth in their core software business revenues.

Saylor, who stepped down as CEO last year, chose to focus more on the Bitcoin aspect of the company’s operations. With a significant legal hurdle recently cleared, the U.S. Securities and Exchange Commission (SEC) is now closer to giving the green light to ETFs that would invest directly in Bitcoin. This potential move has sparked a debate among investors and market watchers about whether the premium currently placed on MicroStrategy’s stock will hold.

Reports indicate that the company’s recent filings have investors pondering the future. Since mid-2020, Saylor has led MicroStrategy to acquire over $5.5 billion in Bitcoin, propelling the company’s stock to over three times its previous value as Bitcoin itself surged.

Currently, MicroStrategy’s stock is estimated to be trading at a 30% premium over the company’s actual enterprise value, attributed to its ownership of 158,245 Bitcoin as of the latest count in September.

Market analysts, including those cited by Bloomberg, suggest that with Bitcoin ETF approval on the horizon, MicroStrategy’s premium could shrink to between 15% and 25%. Despite this, some posit that the introduction of Bitcoin ETFs might trigger a Bitcoin rally, potentially offsetting any decrease in MicroStrategy’s premium by lifting the company’s share price.

In a recent push to increase its Bitcoin holdings, MicroStrategy acquired an additional 5,445 bitcoins for approximately $150 million between August 1 and September 24. The company financed this purchase by selling 403,362 shares of MSTR, their stock symbol.