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U.S. Government Liquidates ANT Tokens for ETH Amid Ongoing Fallout from Alameda Research Collapse

In a significant development in the crypto landscape, former Alameda CEO Caroline Ellison has received a reduced sentence of just two years following her cooperation with federal authorities. This marks CoinOtag

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MicroStrategy Is Running Towards Its All-Time High

Summary MicroStrategy shares are moving closer to its all-time high, trading at 3.15x price/BTC. MicroStrategy`s leveraged BTC strategy and ongoing debt refinancing pose significant risks, with the firm generating a massive operating loss relative to revenue. Despite outperforming BTC, MSTR`s valuation is driven by speculative euphoria, potentially reaching its pre-DOTCOM bubble high amidst a declining Federal Funds Rate. MicroStrategy reported earnings after market close on October 30, 2024, with 2x downward analyst revisions and no upward revisions in the last 90 days. MicroStrategy has been active in the debt market throughout q3’24, redeeming its senior secured 2028 notes through the issuance of $1.01b in 2028 convertible notes with part of the proceeds being allocated to acquiring additional BTC. Given the major run-up in share price and challenging business operational performance, I am reiterating my STRONG SELL rating with a price target of $102.63/share at 1.107x price/BTC. Be sure to review my previous coverage of MSTR here: MicroStrategy Holds Less Bitcoins Than You Think (Q2 Earnings Preview) During q3’24, MicroStrategy issued $800mm in 2.25% 2032 convertible notes and added 25,889 BTC to the company’s holdings. Total BTC holdings at the end of q3’24 sat at 252,220 BTC. The firm also had $650mm of 2025 convertible notes settle all conversion requests in shares. MicroStrategy also raised $1.1b through equity sales in q3’24. Since reporting q2’24 earnings, MicroStrategy has made a few updates to its debt levels. On September 16, 2024, MicroStrategy paid down $500mm of 6.125% 2028 senior secured notes and issued $1.01b in 0.625% 2028 senior convertible notes on September 20, 2024. The convertible notes were issued to pay down the 2028 secured notes as well as to purchase additional BTC. Paying down the secured notes resulted in 69,080 BTC being held as collateral to be released, potentially allowing for MicroStrategy to migrate these BTC to MacroStrategy. The conversion rate on the 2028 notes is set at 5.4589 shares, pricing these shares at $183.19. One of the factors Michael Saylor is bringing to the table is MicroStrategy’s Bitcoin Yield factor, which is essentially the difference in share distribution and BTC value. The example used was a 250bps expense ratio for BTC ETFs, which appears to be quite a high comparison considering that iShares Bitcoin Trust ( IBIT ) costs holders 12bps. Regardless, management believes that the rate of share dilution will be outweighed by the growth in value of the company’s BTC holdings. YTD, the firm’s BTC yield sits at 12.2%, above the previous two years. Looking out to eFY27, management is targeting a BTC yield in the range of 4-8%. Corporate Reports Aside from the additional reporting strategy, MicroStrategy will continue its capital raises in the debt and equity markets. Management laid out their capital raising target for the coming years in their q3’24 earnings report. This will include $21b in equity issuances and $21b in debt over the next few years. Management is targeting $10b in eFY25, $14b in eFY26, and $18b in efY27. Given that MicroStrategy generated an adjusted operating loss of -$802mm as of q3’24 on a trailing twelve-month basis, the firm will likely remain in a cycle of debt refinancing debt. Given that digital assets are not held as a cash & equivalent position and rather a long-term investment, MicroStrategy has $4,264mm in total debt on the balance sheet. Essentially, MicroStrategy is acting as a leveraged BTC strategy on the back of an operating company that generates a massive loss relative to revenue. Corporate Reports Accordingly, the BTC yield targeted will be dependent on the price and accumulation of BTC. As of October 29, 2024, BTC holds a value of ~$73,315, leading MicroStrategy’s total BTC holdings to be valued at $18.5b. TradingView Comparing the performance of MSTR shares to BTC, MSTR has significantly outperformed the underlying asset. This is primarily due to MicroStrategy’s leveraged BTC strategy that enables the firm to issue debt to accumulate BTC. TradingView Valuation & Shareholder Value Corporate Reports As of q3’24, the breakeven price is $36,800/BTC, well below the present level of $73,315/BTC. Using the current price of BTC, MSTR’s valuation sits at 2.71x price to value of its BTC holdings. Using the firm’s capital structure as a guide, I value MSTR shares at 1.107x BTC at $102.63/share. I am reiterating my STRONG SELL rating for MSTR shares. Corporate Reports Though share price independently isn’t a material metric outside of observation, shares are driving towards their pre-DOTCOM bubble high of $333/share, adjusted for stock splits. The driving factor is that BTC may continue its upward trajectory as buy-and-hold strategies continue paired with the possibility of a declining Federal Funds Rate. Perhaps this may also indicate that MSTR is reaching peak euphoria amongst its shareholders. TradingView CoinOtag