Bitcoin / Bitcoins / Crypto Currency

ah, ok. seems like quite a high premium for the tax benefit though.

also Microstrategy doesn't really seem like a widows and orphans type stock ideally suited to a pension portfolio. if it still exists in 10 years i will be surprised, whilst recognising that i have been surprised about quite a few things over the last 5 decades, so there is a chance that the $3tn valuation will work out... (below courtesy of FT)

Saylor doesn’t forecast MicroStrategy’s stock price, but he often makes bold predictions on bitcoin’s price which, given MicroStrategy’s holdings, directly impacts the stock price. Just recently he predicted that bitcoin would hit $13mn per coin by 2045, which would make the company’s current stash alone worth over $3tn, excluding future purchases.

You can hold it in an isa wrapper which you cannot do for btc. Price is broadly correlated to btc and you can buy in and out of it. So I had a market order at 370 having bought in at 130 and 225. Realise those profits and tax free

There are reasons why you might expect it to be valued at a premium to NAV - like pretty much every other quoted company.
For example:

• through time it has increased its ratio of Bitcoin held per share quite significantly - so makes sense to value it on some BTC per share, not the present / historical figure.
  
• some people believe that there is additional value in having a shit load of bitcoin, that you will be able to do things with it - be some sort of bitcoin bank, etc that will create revenue streams. Not clear exactly how they might work, but there could be something in it.
  
• first mover advantage. If anyone else wanted to be the bitcoin bank or whatever and tried to buy up as much BTC as MSTR already has, they most likely couldn't do it without driving the price - and the MSTR share price - up massively
  
  

Where you value it depends on your view of factors like this, but it is not the same as an ETF.

expect it to be valued at a premium to NAV - like pretty much every other quoted company.

Most quoted companies trade at a premium to NAV because they have income streams, so a nav valuation would understate it.

Ones which are more asset based (look at REITs) tend to trade at a discount to NAV, and that's even with revenue creating assets.

Sure, but not sure that helps. The fact is that it is trading now (not always) at a premium to NAV. I was setting out reasons to explain why that might be the case.

Those are reasons why it might not trade at a premium, but given that it is, not sure that they shed a lot of light, do they - reasons why something should not do what it plainly is doing?

Actually, turning it round, one reason could be irrational exuberance on behalf of investors in the face of normal valuation logic - maybe that is what you are saying...?

If you can handle it (lots of 'bro-ness'), this video series explores some of the intricacies that are impacting MSTR price in relation to BTC (and why they think mNAV is about to explode): https://www.youtube.com/watch?v=I16llak_IS4&ab_channel=QuantBros

Sure, but you're saying "yes of course it makes sense it's trading above NAV, that's normal". So yeah - I think it's irrational.

so, is @hippy rich or not?

I didn't say that. I set out some reasons which might explain it. I didn't say I believed any of them!

Ok fair enough, I didn't get that from the tone!

I didn't say I didn't believe them either! It doesn't really matter what I believe, anyone who invests has got to make their own mind up on questions like these - but ultimately it will be a leap of faith, so what you said - exuberance - is really the only proper answer.

FWIW I definitely believe the first one. I think the amount of Bitcoin held per share has gone up something like 27% this year, and there are reasons to believe that this should continue. So I would value it on bitcoin held in the future, not past/present.

I don't really understand the 'bitcoin bank' idea. There might be something in it, I just don't know.

The third reason I gave - first mover advantage - isn't really a reason to buy MSTR rather than BTC. So it would be a reason to have BTC exposure of some sort, if you think other buyers are going to steam in eg Microsoft, US government, etc.

[Disclosure - I did buy some MSTR earlier this year]

FWIW I definitely believe the first one. I think the amount of Bitcoin per share has gone up something like 27% this year, and there are reasons to believe that this should continue. So I would value it on bitcoin held in the future, not past/present.

I don't follow this - it doesn't have the asset yet and would have to expend resources to get it, and would do so at an uncertain price. Why bake in any additional value for that? Its like saying I'm going to start spending as if I have made a profit from bitcoin without me having bought any yet, but with a vague plan to do so in the future

It's got a pretty firm plan, though, that it has a track record of having executed on in the past.

The resources it spends are its own equity - valued at a premium to what it is buying - and cheap debt that it is able to convert to equity.

Yes but it will have to spend the market price. It's mad to think that a plan to buy something increases value / share price when it's a speculative asset with no income return or ability to enhance it. It either uses cash it holds (so it spends £100 and get BTC worth £100. Or in reality marginally less to account for any transaction costs) or it borrows and incurs a liability and an asset.

In neither case has it added any value. It makes no logical or economic sense.

Put it another way - what would you value a company with no BTC at that just had a bit of cash and a plan to buy some? Surely no more than the value of the cash it already holds?

If that's not your answer then I'm off to companies house and will happily sell you some shares

You've also got the change in accounting standards coming which will require them to include unrealised capital gains in their earnings - so they will suddenly have a very high eps.

It's an accounting change not a real one, but algos or anyone trading based on valuation ratios might change their view based on it.

It either uses cash it holds (so it spends £100 and get BTC worth £100. Or in reality marginally less to account for any transaction costs) or it borrows and incurs a liability and an asset.

No. It spends its own equity, valued at whatever the NAV premium is, say 2.7x Bitcoin to buy more Bitcoin. If you like, a bitcoin that it buys is instantly re-rated by 2.7x. Or it can buy 1 bitcoin for an amount of its own equity which represents 1/2.7 or about 0.37 BTC

"its own equity" is just cash it holds after issuing shares.

Correct, but people are buying these shares at 2.7x so it gets more cash than the $ value of the BTC the shares sold represent - 2.7x

Yes and this is the bit that makes no sense.

Also what was wrong in what I said above? You said "no"

It doesn't hold cash, not for any length of time. It sells shares to buy Bitcoin, not to raise cash balances.

So what though? It's still the same transaction - it takes its £100 of cash (sure, it's newly raised cash, but don't see what difference that makes) and gets BTC of £100 at that time.

Nothing in that suggests we should value it as if it already owns more BTC than it does now.

Look at the first stage of the transaction: It sells equity which represents 0.37 of a Bitcoin for the cash value of 1 Bitcoin.

The next time it can sell equity representing 1 Bitcoin for cash to the value of 2.7 Bitcoin

And so on.

The only way that helps is if you're saying it is expressly a Ponzi scheme - i.e. you think the company's value will go up in the future as it will keep getting more money than it needs to buy BTC and therefore it's value increases on subsequent transactions? Is that your point?

It doesn't justify why an investor now would pay the premium for shares Vs BTC unless you think some others will keep paying in after you (by some multiple, as you've bought in well down on actual assets).

You're basically saying that the company is worth more than NAV because the share price is higher, so that justifies the higher share price. It's circular

It sells equity which represents 0.37 of a Bitcoin for the cash value of 1 Bitcoin.

This is an interesting artefact of the current stock price. Whether this will persist in the medium or long term is anyone's guess.

History suggests it won't.
Over the last cycle it has behaved like leveraged bitcoin. It went below NAV when the bitcoin price fell.