[PODCAST] MicroStrategy Madness (MSTR)
Things...uh...might be getting a bit out of hand
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We had to cover MicroStrategy on the podcast this week (links above). The stock is up 720% in the last twelve months and, well, it just took out $3 billion in convertible notes with a 0% interest rate. The sole purpose of this debt is to buy Bitcoin. Giddy up.
For those who don’t know, MicroStrategy is an unprofitable software company that decided to start loading up on Bitcoin in 2020. It has done so by taking on debt and selling new shares of stock. Shares outstanding have grown at a 22% annual clip since the end of 2020.
Financiers seem to think it prudent to lend MicroStrategy $3 billion in convertible notes due in 2029. The strike price is close to 50% higher than where MicroStrategy trades today.
What part of the cycle do you think we are in?
Oh, right, the one where the MicroStrategy CEO compares a Bitcoin Strategic Reserve to purchasing the island of Manhattan or Alaska. If you are wondering what a “Strategic Bitcoin Reserve” is, join the club.
I’ll just let you chew on these screenshots. From the WSJ this morning:
Let’s be clear:
Bitcoin is still an unproductive asset
Bitcoin (and other cryptocurrencies) are a giant waste of electricity that could be used instead to help bring the poorest people on this planet out of poverty
Establishing a “Strategic Bitcoin Reserve” is not only nonsensical but a dangerous meme that would further deteriorate the reputation of the United States global financial and currency system. Trust me, you do not want this global financial order to be upended.
Bitcoin does not create net value for our civilization. If you made money buying Bitcoin at a lower price and selling it at a higher price (priced in fiat, wink wink), you had to buy that Bitcoin from someone and sell it to another person. There is no value being created.
If you get rich off Bitcoin, congratulations. You won the zero-sum game. I just hope you are right about it being good for society. Because from the sidelines, it looks to me like a wildly parasitic mindset with huge negative externalities.
But hey, you at least made a few bags, right? That makes the whole thing worth it.
-Brett
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