MicroStrategy is Outperforming Bitcoin Because of Bitcoin

Your Bitcoin position might be doing well, but not as well as MicroStrategy (NASDAQ: MSTR). Up more than 170% over the month, MicroStrategy's stock price has outperformed Bitcoin by more than 3x.

Even over the past year, MicroStrategy share prices have more than doubled Bitcoin's performance. Bitcoin might be edging closer to its all-time high but MicroStrategy is on an even higher trajectory.

MicroStrategy chairman Michael Saylor has retained his bullish Bitcoin stance, stating he will continue to buy the world's biggest cryptocurrency forever.

“I’m going to be buying the top forever, Bitcoin is the exit strategy," he said last month, adding that the cryptocurrency is stronger than gold. “We believe capital is going to keep flowing from those asset classes into Bitcoin because Bitcoin is technically superior to those asset classes and that being the case, there’s just no reason to sell the winner and to buy the losers.”

But ironically, the driver behind MicroStrategy's astronomical surge is Bitcoin itself.

In a statement on 4 March, MicroStrategy revealed that it intends to raise $600 million to buy more Bitcoin. The funds will be issued in the form of senior convertible notes.

Senior convertible notes are a type of debt security issued by companies with a higher priority of repayment, offering investors the option to convert their debt into equity at a future price.

"MicroStrategy intends to use the net proceeds from the sale of the notes to acquire additional bitcoin and for general corporate purposes," the firm stated.

"If MicroStrategy redeems fewer than all the outstanding notes, at least $90 million aggregate principal amount of notes must be outstanding and not subject to redemption as of the relevant redemption notice date," it added.

The notes are set to mature on 15 March 2030, unless earlier purchased, redeemed, or converted, and will be converted into cash, shares of MicroStrategy’s class A common stock.

MicroStrategy holds 193,000 BTC as of February 2024.

Bitcoin's recent climb is a result of small buyers fearing they would miss out on the new ETFs. Fund managers are likely to stay split along these lines as companies try to get a bigger part of a growing asset class.

At the same time, there are signs that BlackRock is getting ahead of Fidelity to take the lead in the field.

New money poured into the New York-based company's IBIT fund on February 28 - $612 million, the most in a single day since it opened. It has been getting most of the new money for most of last month.