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330 sats \ 7 replies \ @freetx 5 Mar \ on: Will MSTR Outperform or Underperform Against Bitcoin? bitcoin
Its effectively a 2x long....so if BTC goes up, MSTR (in theory) should go up more.
Likewise if BTC goes down, so will MSTR (maybe to the point of collapse depending on factors).
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Not actually a 2x, just meant its a leveraged long.
Using (a) share issuance, (b) operating income, (c) debt issuance....saylor pumps money back into bitcoin which forms a virtuous cycle (balance sheet rises, so share price rises, which leads more shares issued).
This is basically a BTC printing machine during bull markets, unknown how this would unwind if a sharp drop occurred.
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when it comes to share issuance and operating income, is it right to say these are not “leveraged” activities?
selling shares isn’t creating any leverage, it’s just diluting current shareholders and adding more bitcoin to the balance sheet to counteract the dilution.
using operating profits doesn’t create leverage or dilute shareholders either.
so only the debt issuance is adding leverage, right?
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yep you are of course right, its not "leverage"
However, it will functionally act as leverage. If 99% of your valuation is your balance sheet and your balance sheet falls by 80%, then obviously your stock will crater as well.
This then impacts your ability to raise more money and may in fact trigger loans to be called.
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right, but in the context of outperforming/underperforming BTC, MSTR would probably outperform if they only used share issuance and operating profits, right?
i know the debt introduces some additional risk, but if we remove that variable for now, wouldn’t it be reasonable to think MSTR would outperform as long as operating profits were positive?