MicroStrategy Deep Dive (Part 2)

MicroStrategy's stock price has risen significantly despite increasing the number of shares outstanding, which usually dilutes shareholder value. This is due to the company's strategy of using equity offerings to buy Bitcoin, which has increased the Bitcoin holdings per share and boosted the stock's multiple of its net asset value (mNAV). As long as MicroStrategy continues to trade at a premium to its Bitcoin holdings, this strategy can be successful, and the company can continue to benefit from Bitcoin's price appreciation.

Stock Splits vs. Dilution

• 00:01:17 Stock splits do not dilute shareholder value because the stock price adjusts accordingly, essentially slicing a pie into more pieces without changing the overall ownership. However, MicroStrategy's share count has increased significantly, leading to a question about potential dilution despite the stock price rise.

MicroStrategy's Bitcoin Strategy

• 00:02:05 MicroStrategy's strategy involves issuing new shares and using the proceeds to buy Bitcoin, which increases the Bitcoin holdings per share. This strategy only works if the stock trades at a premium to its Bitcoin holdings, allowing the company to issue more shares without diluting shareholder value, and it can potentially further boost the price of Bitcoin.

Mnav and Equity Offerings

• 00:07:24 MicroStrategy's mNAV, or the multiple of its net asset value, is crucial for its ability to raise capital. When mNAV is above 1, MicroStrategy can issue new shares at a premium to buy more Bitcoin without diluting shareholder value. However, if mNAV is below 1, the company may need to use other methods such as bonds to raise capital.

Bitcoin Holdings per Share

• 00:09:10 The amount of Bitcoin held per share of MicroStrategy has been increasing, which has driven the stock price up. This increase is a result of the company's strategy of using equity offerings to purchase more Bitcoin, and it correlates to the stock price appreciation.