Summary I've become a strong Bitcoin believer and shifted my portfolio allocation to BTC and correlated assets like MicroStrategy. MSTR's recent underperformance versus Bitcoin is due to relentless ATM equity offerings, compressing its premium to net asset value (mNAV). Despite dilution concerns, MSTR's bold capital raises are a calculated bet on Bitcoin's long-term potential, aiming for massive future accretion. I remain long MSTR, as its strategy positions it as the dominant institutional Bitcoin holder, with unparalleled first-mover advantage. Before We Dive In: A Quick Bitcoin Check-In Before we dive into the core idea, allow me to share a quick update and provide some context for those who haven’t seen my earlier updates. So, a few months ago, I turned into a Bitcoin ( BTC-USD ) believer — big time. Now, I know this doesn’t resonate with everyone, especially considering that most of my followers are likely more traditional, value-oriented investors. It honestly took some guts to aggressively turn my attention to what many still view as a highly speculative and volatile digital commodity, along with the growing ecosystem of assets tied to it, particularly the recent trend of Bitcoin treasuries that seem to be sprouting up everywhere like weeds. But the truth is, once you put on the Bitcoin glasses, it’s hard to take them off. So while I still hold individual stocks and traditional ETFs, I’ve been gradually increasing the percentage of my portfolio allocated to spot Bitcoin and, to a lesser extent, other assets correlated with it. More specifically, I have been building a position in MicroStrategy ( MSTR ), whose preferreds ( STRK ) and ( STRF ) I’ve also covered on Seeking Alpha here and here , explaining why I believe they could become highly accretive tools for Saylor and Co. I have also taken an interest and built a small position in Semler Scientific ( SMLR ), which has been trading at a discount relative to its BTC holdings. I published an article on this matter in late March, and since then, the stock has significantly outperformed the S&P 500. MicroStrategy’s Bitcoin Paradox: Unpacking Stock Underperformance Amid BTC’s Surge Now, let’s shift gears to the main topic: MSTR’s recent underperformance relative to Bitcoin, particularly during the very days when BTC broke through to new all-time highs. By the way, while MSTR has actually outperformed BTC, gold, and pretty much the rest of the market by a wide margin over the past three months... MSTR's 3-Month Return (strategy.com/charts) ...the underperformance I am referring to is that of the past few days/weeks, which has many bulls in the MSTR community worried that Saylor's indefinite dilution plan might be broken. As you can see, MSTR's returns have decoupled from those of BTC's over the past few weeks. Bitcoin hit new highs, all while MSTR stayed flat. The moment BTC dipped slightly, MSTR sold off even further. That's certainly a concerning sight for bulls, especially since MSTR is supposed to outperform BTC during its runs, given its leveraged nature. BTC/MSTR Returns (Koyfin) I mean, the stock now hovers about $370, a sharp contrast to its $500+ peak in late 2024 when it held just 386,700 BTC, at the time worth about $37 billion at a Bitcoin price of about $94,000. You can see why this underperformance, despite a 47% increase in Bitcoin holdings, has sparked intense debate among investors. The BTC/share may be going up, but at the end of the day, nobody seems to care if this doesn't (immediately) translate to a rising BTC price with it. BTC/MSTR Returns (Koyfin) So what's going on? In short, a compressed multiple to net asset value (mNAV), relentless at-the-market (ATM) equity offerings. Let's look at this a little deeper. With Bitcoin trading at $110,000, the portfolio’s market value is roughly $63.8 billion. Strategy’s market cap, however, sits at $102 billion, with ~280 million diluted shares, translating to 0.002 BTC per share. Compare this to November 2024, when MSTR’s market cap reached $110 billion with fewer shares (260 million) and 386,700 BTC. Back then, the mNAV premium (market cap divided by Bitcoin holdings value) was 2.7x to 3.3x, meaning investors paid $2.70–$3.30 for every $1 of Bitcoin held, per CoinDesk. Today, that premium has tightened to 1.7x–2.0x, signaling a loss of investor enthusiasm despite Bitcoin’s tremendous rally since the U.S. election in November 2024. This multiple compression explains why MSTR’s stock hasn’t mirrored Bitcoin’s ascent. MSTR's Premium to NAV (bitcointreasuries.net/entities/microstrategy) This raises the question, why the mNAV squeeze? Well, first, the rise of spot Bitcoin ETFs like IBIT has led many investors to migrate to these assets for exposure to Bitcoin without Strategy’s operational risks. I have also seen many investors trying to figure out which is going to be the next Bitcoin Treasury success story. Monitoring investors' activity in MSTR-related threads, you can see many selling MSTR to buy more-hyped-up names in the space these days, like Metaplanet ( OTC:MTPLF ), which ended last week up 45% even following Friday's steep sell-off. But more importantly, the ruthless ATM offering is at the heart of this multiple compression. Strategy’s “21/21 Plan,” announced in October 2024, targeted $21 billion in equity raises over three years to buy Bitcoin. Strategy obliterated this target, raising the full $21 billion by Q4 2024. This breakneck pace led to an upsized plan announced along with Q1, which launched a new $21 billion common stock ATM and a $21 billion perpetual preferred stock ATM, effectively doubling the equity component to $42 billion alongside $21 billion in fixed-income securities. Quarter-to-date in Strategy has already raised $2.39 billion , also moving way ahead of schedule. The ATM printer is clearly working overtime. Just look at some of the most recent transactions, which are being funded solely through the ATMs (the majority of which are common MSTR stock). MSTR's Histrorical Purchases (strategy.com/purchases) So you see how, with such a brutal ATM in place hammering the stock down day in and day out, some investors have started to get tired and believe that Saylor is going to keep diluting them forever, and at some point, this whole thing is about to blow up. And to be honest, they are right. I have watched Mr. Saylor talk for dozens of hours in various podcasts and interviews, and I can tell you that he definitely intends to keep the dilution trend strong "as long as it makes sense." So, then the question is: Does it make sense? Probably, yes. Here's why: The Case for Relentless ATM: Buying Manhattan in 1890 Essentially, despite the short-term stock pain, Strategy’s ATM is a calculated bet on Bitcoin’s long-term potential, rooted in Michael Saylor’s vision of a $13 million BTC by 2045. In his eyes, this is 1890, and you can borrow at 0% to buy Manhattan real estate. How much do you buy? All of it. Strategy’s access to low-cost capital (0% convertible notes and ATM sales at a premium to NAV) mirrors this opportunity. With Bitcoin’s $2.2 trillion market cap at just 0.23% of global wealth, Saylor projects it capturing 2.34% ($21 trillion) at $1 million or 7% ($65 trillion) at $3 million within a decade. At $13 million, Strategy’s 580,225 BTC would be worth $7.5 trillion, dwarfing its $102 billion market cap today (even if the share count surges, as the dilution is, in principle, accretive). The Counterargument To The Relentless ATM Now, I get that MSTR's financial engineering is highly controversial, and the critics have strong arguments. The most prominent argument against MSTR's strategy is that Saylor and Co. are not letting the stock breathe. Many argue that easing ATM sales could let mNAV expand to 3x, 4x+, enabling more Bitcoin per dollar of equity. At a 3x mNAV, $1 billion could buy 9,346 BTC at, say, $107,000, versus 6,667 BTC at 2x—a 40% accretion boost. But then again, given how in every presentation and webcast, management spends tons of time explaining how important the whole theme around accretion is, they must know better than the critics. They likely believe they can sustain the valuation premium, since there is no way they would be willing to destroy the very lever they have created in order to grow BTC per share, and ultimately the business model and hype surrounding the stock. If letting the stock run made more sense, they would likely be doing that. Again, this goes back to buying as much BTC as possible as early as possible. I also view the possibility of Saylor wanting to build a chest large enough to kill the chance of other companies ever catching up to MSTR. With 580,225 BTC, Strategy holds ~2.8% of the 21 million Bitcoin supply. If Bitcoin reaches, say, $1 million, its $585 billion treasury would make it prohibitively expensive for competitors to catch up. Acquiring even 1% of the supply (210,000 BTC) at $1 million would cost $210 billion, a sum few firms could muster, especially as Bitcoin’s price would likely surge during such accumulation due to supply constraints. In a future where Bitcoin becomes a standard for collateral or reserve assets, banks, insurers, and institutions would likely turn to the largest, most credible holder: MSTR. This first-mover advantage essentially positions MSTR as a potential backbone for institutional Bitcoin adoption, akin to a digital vault for global finance. So, you can't really blame MSTR's buying frenzy. So as long as MSTR's financial engineering makes sense on paper (which it does), I plan on staying long.
