Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/microstrategy-inc-cl-a" target="_blank" data-smartkarma-citation="entities:14717:1" rel="noopener">MicroStrategy Inc Cl A (MSTR US)</a> is now trading at a ~26% discount to NAV as the bitcoin barbeque continues.  </li>
<li>Bitcoin is down ~40% YTD. If it falls another 24%, this will trigger a margin call on one of its loans.</li>
<li>Should bitcoin decline to US$17.5k, MSTR's crypto bet falls short of its debt obligation; debt that its software ops are not sufficiently profitable enough to service. </li>
</ul>



MicroStrategy Inc Cl A (MSTR US) is now trading at a ~26% discount to NAV as the bitcoin barbeque continues.  
Bitcoin is down ~40% YTD. If it falls another 24%, this will trigger a margin call on one of its loans.
Should bitcoin decline to US$17.5k, MSTR's crypto bet falls short of its debt obligation; debt that its software ops are not sufficiently profitable enough to service. 


MicroStrategy (MSTR US): Money From Nothing Is Worth?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/microstrategy-inc-cl-a" target="_blank" data-smartkarma-citation="entities:14717:1" rel="noopener">Microstrategy Inc Cl A (MSTR US)</a> reported a net loss of $155.6mn in the fourth quarter, compared to the net loss of $124.3mn in the 4Q21. </li>
<li>MSTR took a non-cash digital asset impairment charge of $170.1mn in the first quarter, up from $146.6mn in the 4Q21. </li>
<li>A bet on MSTR is a bet on bitcoin. Yet MSTR is down 37% YTD, compared to ~20% for bitcoin. </li>
</ul>



Microstrategy Inc Cl A (MSTR US) reported a net loss of $155.6mn in the fourth quarter, compared to the net loss of $124.3mn in the 4Q21. 
MSTR took a non-cash digital asset impairment charge of $170.1mn in the first quarter, up from $146.6mn in the 4Q21. 
A bet on MSTR is a bet on bitcoin. Yet MSTR is down 37% YTD, compared to ~20% for bitcoin. 


Microstrategy: More Losses For Bitcoin Spruiker

<ul>
<li>
<a href="https://www.smartkarma.com/entities/microstrategy-inc-cl-a" target="_blank" data-smartkarma-citation="entities:14717:1" rel="noopener">Microstrategy Inc(MSTR US)</a><a href="https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/microstrategy-announces-fourth-quarter-2021-financial-results_02-01-2022.pdf" target="_blank" rel="noopener"> reported</a> a net loss of $90mn or $8.43/share in the fourth quarter, missing consensus estimates for a profit of US$0.89/share.</li>
<li>The loss is predominantly due to the inclusion of impairment losses of US$146.6mn on its Bitcoin holdings, negating the $110.5mn in gross profit from the software ops.</li>
<li>MicroStrategy remains a bet on Bitcoin. Yet almost any alternate cryptocurrency security appears a better bet, if that is your bent.</li>
</ul>



Microstrategy Inc(MSTR US) reported a net loss of $90mn or $8.43/share in the fourth quarter, missing consensus estimates for a profit of US$0.89/share.
The loss is predominantly due to the inclusion of impairment losses of US$146.6mn on its Bitcoin holdings, negating the $110.5mn in gross profit from the software ops.
MicroStrategy remains a bet on Bitcoin. Yet almost any alternate cryptocurrency security appears a better bet, if that is your bent.


Microstrategy's Unsurprising Bitcoin Loss

<div>
That trade worked out well.
In my note <a href="https://skr.ma/eEB66" target="_blank" rel="noopener">Microstrategy (MSTR US): "Crypto Through The Tulips"</a> back on the 28 June, I recommended shorting <a href="https://www.smartkarma.com/entities/microstrategy-inc-cl-a" target="_blank" data-smartkarma-citation="entities:14717:1" rel="noopener">Microstrategy Inc Cl A (MSTR US)</a> and going long bitcoin.
MSTR is up 2.3% since, against 30% for BTC.
MSTR has a tendency to issue paper to buy more bitcoins when the stock is at a large premium to its Bitcoin holdings.  As per its <a href="https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/microstrategy-acquires-additional-bitcoins-and-now-holds-over-105000-bitcoins-in-" target="_blank" rel="noopener">21 June 21</a> announcement, MSTR said it held 105,085 bitcoins. That figure remains unchanged.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/764/original/image_1404123321631156413189.png?1631156418" class="editor-image img-responsive" data-smartkarma-image-id="228764"></figure>
MSTR's share price was US$123 prior to its initial announcement on the 11 August 2020 it was "adopting Bitcoin as a primary treasury reserve asset".
The current implied value for MSTR's stub ops - selling business intelligence software - is US$158/share, having touched US$141/share, suggesting value was emerging.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/821/original/image_21363881771631163833057.png?1631163833" class="editor-image img-responsive" data-smartkarma-image-id="228821"></figure>
Yet is MSTR the ideal proxy for bitcoin? And just how much legitimacy should be attached to El Salvador giving bitcoin the status of legal tender?
More below the fold.
</div>


That trade worked out well.
In my note Microstrategy (MSTR US): "Crypto Through The Tulips" back on the 28 June, I recommended shorting Microstrategy Inc Cl A (MSTR US) and going long bitcoin.
MSTR is up 2.3% since, against 30% for BTC.
MSTR has a tendency to issue paper to buy more bitcoins when the stock is at a large premium to its Bitcoin holdings.  As per its 21 June 21 announcement, MSTR said it held 105,085 bitcoins. That figure remains unchanged.

MSTR's share price was US$123 prior to its initial announcement on the 11 August 2020 it was "adopting Bitcoin as a primary treasury reserve asset".
The current implied value for MSTR's stub ops - selling business intelligence software - is US$158/share, having touched US$141/share, suggesting value was emerging.

Yet is MSTR the ideal proxy for bitcoin? And just how much legitimacy should be attached to El Salvador giving bitcoin the status of legal tender?
More below the fold.


Microstrategy (MSTR US): Bitcoin's Mainstream/Fringes Balancing Act

Full disclosure - I'm somewhat of a cryptocurrency sceptic. I think Bitcoin is not an "investment" but a "speculation." SEC officials have stated their view that bitcoin is not a “security” for purposes of the US federal securities laws. It has zero correlation with the real economy and zero fundamentals - and can potentially go to zero.  It is, in my view, digital Monopoly money.
I stop short of calling Bitcoin a Ponzi scheme. There are no centralised actors here primed to bail (or at least no publicly-self-identifying centralised actors)
BUT - and there's always a but - Bitcoin is a recognised commodity. And it is possible to obtain crypto Visa cards and store crypto in a PayPal account, which lends a certain confirmation bias with the support of these traditional financing systems. Or perhaps the transaction fees revolving around cryptos are simply too big to ignore. 
And there is an increasing number of jurisdictions world-wide granting money transmitter licenses to cryptocurrency exchanges - although news overnight of the UK watchdog banning crypto exchange Binance serves to illustrate the issues surrounding these regulated activities.  
This all brings us to <a href="https://www.smartkarma.com/entities/microstrategy-inc-cl-a" target="_blank" data-smartkarma-citation="entities:14717:1" rel="noopener">Microstrategy Inc Cl A (MSTR US)</a>. 
As of the<a href="https://www.microstrategy.com/en/investor-relations/press/microstrategy-acquires-additional-bitcoins-and-now-holds-over-105000-bitcoins-in-total_06-21-2021" target="_blank" rel="noopener"> 21 June</a> MicroStrategy holds  "approximately" 105,085 bitcoins, which were acquired at an aggregate purchase price of $2.741bn and an average purchase price of $26,080/ bitcoin.
Microstrategy is, in effect, a holding company for bitcoin. Stub ops are largely immaterial.
That stash of "coins" is currently worth US$3.6bn versus Microstrategy's current market cap of US$5.4bn. This is before factoring in the three hard-currency fund-raising exercises in the past six months. Mmm.
More below the fold.

Full disclosure - I'm somewhat of a cryptocurrency sceptic. I think Bitcoin is not an "investment" but a "speculation." SEC officials have stated their view that bitcoin is not a “security” for purposes of the US federal securities laws. It has zero correlation with the real economy and zero fundamentals - and can potentially go to zero.  It is, in my view, digital Monopoly money.
I stop short of calling Bitcoin a Ponzi scheme. There are no centralised actors here primed to bail (or at least no publicly-self-identifying centralised actors)
BUT - and there's always a but - Bitcoin is a recognised commodity. And it is possible to obtain crypto Visa cards and store crypto in a PayPal account, which lends a certain confirmation bias with the support of these traditional financing systems. Or perhaps the transaction fees revolving around cryptos are simply too big to ignore. 
And there is an increasing number of jurisdictions world-wide granting money transmitter licenses to cryptocurrency exchanges - although news overnight of the UK watchdog banning crypto exchange Binance serves to illustrate the issues surrounding these regulated activities.  
This all brings us to Microstrategy Inc Cl A (MSTR US). 
As of the 21 June MicroStrategy holds  "approximately" 105,085 bitcoins, which were acquired at an aggregate purchase price of $2.741bn and an average purchase price of $26,080/ bitcoin.
Microstrategy is, in effect, a holding company for bitcoin. Stub ops are largely immaterial.
That stash of "coins" is currently worth US$3.6bn versus Microstrategy's current market cap of US$5.4bn. This is before factoring in the three hard-currency fund-raising exercises in the past six months. Mmm.
More below the fold.

Microstrategy (MSTR US): "Crypto Through The Tulips"

United States

MicroStrategy Incorporated provides business intelligence software and related services.  The Company's technology platform enables departments and enterprises to deploy Web-based reporting and analysis solutions.  MicroStrategy also offers consulting, training, and support services.  Solutions are provided to retail, finance, telecommunications, insurance, dot-com, and healthcare industries.

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Microstrategy Inc Cl A (MSTR US)

MicroStrategy (MSTR US): Money From Nothing Is Worth?

MSTR may shortly boast a highly volatile investment, which is surpassed by a very real debt obligation, which is inadequately serviced by a modest,...

David Blennerhassett

Microstrategy: More Losses For Bitcoin Spruiker

I'm still not even remotely a buyer of this strategy. Arguably that "store of value" bet paid off in late 2020. But it hasn't worked for near on 17...

David Blennerhassett

Microstrategy's Unsurprising Bitcoin Loss

The 4Q21 loss is due to the inclusion of losses of US$146.6mn on its Bitcoin holdings, negating the $110.5mn in gross profit from its software ops....

David Blennerhassett

Microstrategy (MSTR US): Bitcoin's Mainstream/Fringes Balancing Act

But my preference would be cryptocurrency exchange platforms, as they capture all key digital currencies, plus dumb down some of the volatility of...

David Blennerhassett

Microstrategy (MSTR US): "Crypto Through The Tulips"

At the current levels, I'd short Mictostratgy and go long BTC. Alternative conclusion to what one investor deemed Microstrategy to be a bitcoin...

David Blennerhassett

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