Is MicroStrategy a Buy Now?

Core Viewpoint - Strategy, formerly MicroStrategy, has transitioned from an enterprise software company to the largest corporate holder of Bitcoin, with its stock price increasing nearly 1,800% since its first Bitcoin purchase in August 2020 [1][2]. Group 1: Business Model Shift - The company shifted its focus to Bitcoin investment due to sluggish revenue growth and excess cash, with former CEO Michael Saylor allocating $250 million to Bitcoin in 2020, making it the first publicly traded company to do so [3]. - Strategy has acquired 478,740 Bitcoins for approximately $31.1 billion at an average price of $65,033 per Bitcoin, with potential profits of around $10 billion if Bitcoin reaches $87,000 [4]. Group 2: Financial Position - As of Q4 2024, Strategy holds Bitcoins valued at over $41 billion, while its market capitalization stands at $65 billion, indicating a significant discrepancy [2]. - The company has transitioned from having $531 million in net cash to a net debt of $7.2 billion, with outstanding shares increasing by 178.6% to 258.1 million since August 2020, resulting in a dilution of approximately 64% [6]. Group 3: Funding Strategy - To finance Bitcoin purchases, Strategy has raised capital through debt issuance, common stock offerings, and convertible notes, with at least $6.2 billion available from convertible notes and a recent public offering of preferred stock expected to generate approximately $563 million [5][7]. - The company could potentially have at least $7 billion to acquire more Bitcoin in 2025 and beyond [7]. Group 4: Risks and Challenges - The primary risk for Strategy is a prolonged decline in Bitcoin prices, which could affect the willingness of convertible noteholders to convert their debt into stock, potentially leading to cash repayment obligations [8]. - Despite the risks, management asserts that all Bitcoins are unencumbered, mitigating the risk of margin calls [9]. Group 5: Valuation Considerations - The adjusted enterprise value of Strategy, considering its net debt and projected diluted shares, is approximately $103.5 billion, which is more than double the value of its Bitcoin holdings [13]. - The company is likely to continue purchasing Bitcoin, but this will come at the cost of increased debt or further shareholder dilution [14].