MicroStrategy is NOT in trouble! But I still would not buy their stock (MSTR)

Micro Strategy, also called Strategy, is
not in trouble, but I still would not
buy their stock. Let’s talk about it.
Because Micro Strategy, also known as
Strategy, owns more Bitcoin than any
other organization in the entire world,
more than any other company, more than
any other country. Uh, Strategy owns
more Bitcoin than anyone, and like bar
none. Okay. So, how did they acquire
$650,000
Bitcoin, which is $55 billion of
Bitcoin? Well, first of all, they have a
profitable software company. And so,
they started using the profits of the
software company to buy Bitcoin back in
the year 2020, so about five plus years
ago. Then, when that wasn’t enough, they
issued more stock of their company to
the market and used it to buy Bitcoin,
which made their stock price go up. So,
they issued even more stock to the
market to buy more Bitcoin. It’s what’s
uh known or became known as an infinite
money glitch, which is you issue your
stock to the market, you use the
proceeds to buy Bitcoin, then you issue
more stock, use it to buy Bitcoin,
rinse, repeat, rinse, repeat, rinse,
repeat. Obviously, it’s dilutive to your
existing shareholders, but they’re
getting more Bitcoin. So, over time, you
end up with more, if you do it
creatively, you can end up with more
Bitcoin per share. Uh that’s called BPS,
Bitcoin per share, uh as people have
come to call it. Okay. So, one second
here. So, with more Bitcoin per share,
um hypothetically, it makes sense to own
the stock because the stock could be
could be worth more than the holdings of
the Bitcoin. And initially, it was when
Micro Strategy started doing this that
the MNAV, which is the multiple to net
asset value. NAV is net asset value. So
MNAV is the multiple of the net asset
value and normally it would be one,
right? So if I came to you and said, I
have a special stock that represents a
$20 bill. Well, guess how much that
special stock is worth? It’s worth 20
bucks because the only thing I own is a
$20 bill and I have one share of stock
that represents ownership in that $20
bill. So that should be, you know, $20.
But if I tell you I have a very creative
and roundabout way of resulting in
getting more than $20, well then the
stock should be worth more than $20
because even if I only have $20 now, if
I have the ability to turn that $20 into
$30, then the stock could be worth $30.
So Bitco uh so Micro Strategy has
historically traded for most of their
life above their MNAV. their their
multiple of net asset value has been
above one, meaning the value of the
company has been worth more than all of
the Bitcoin they own. Now, part of that
is because they still have a very small
software company attached to everything
else they’re doing, which is effectively
irrelevant at this point, but
regardless, they still do have a
software company that’s not worth zero.
But mainly, it has been due to people
understanding that they can use
leverage. leverage meaning bit uh Micro
Strategy is a publicly traded company
which means they can borrow money on the
public debt markets really cheap and
they have done that they have now
borrowed like $9 billion to buy more
Bitcoin in addition to all the stock of
their company that they have issued to
buy more Bitcoin as well. So they now
have $9 billion of debt.
Well, why is that a problem? Well,
because they their assets there is an
imbalance between their assets and their
liabilities. Their liabilities are $9
billion of US dollars that they owe.
Their assets are $55 billion of Bitcoin.
Now, obviously, you can convert Bitcoin
to dollars and back and forth again. So,
technically they are over collateral
over collateralized by a massive margin.
I think I forget what the exact ratio
is, but anyway, they they publicize
their exact it’s whatever I don’t know
55 billion divide by 9 is whatever that
is. I’m not going to do math in my head.
Um, so anyway, they’re massively
overcolaterized, but they’re
collateralized in an asset that is
different than what they owe. So,
recently they had an assessment by an
organization that rates their bonds and
they got a poor assessment because they
said, “Hey, you owe $9 billion, but you
don’t have any US dollars. You have a
ton of Bitcoin, but you don’t have bit
you don’t have US dollars. So, how do we
know you can pay your bonds if you only
own Bitcoin? And what if the Bitcoin
goes down? Okay, so Micro Strategy uh
what is today? Monday, Friday, whatever.
Earlier this week, I guess it was
earlier this week. Yeah. So, earlier
this week, Micro Strategy raised $1.5
billion of US dollars. They used some of
it to buy Bitcoin and they kept the rest
of it in a US dollar reserve that was
earmarked to pay debt payments on their
US dollars. So now they have 21 months
of interest payments set aside. So now
when the bond rating agencies come
along, they can look at Micro Strategy
and they they can say, “Hey, you owe $9
billion, but you have $1.5 billion to
make interest payments.” Which means at
a minimum you’re not going to be in
trouble for a couple of years. you could
survive a uh Bitcoin bare market that
lasts for more than two years because
you have enough US dollars to pay those
dividends payments. Now, some people
were belly aching about that about why
is Micro Strategy the biggest Bitcoin
booster in the world owning US dollars?
The answer is because they borrowed US
dollars. And if your interest payments
are denominated in US dollars and you
have a sizable amount of them to make,
in this case more than $800 million of
US dollar interest a year, then it would
be prudent, especially if you’re trying
to get a high credit rating rating
agency rating, it’d be prudent to have
some US dollars set aside to pay for
those uh interest payments so that
you’re not stuck selling Bitcoin at a
steeply discounted price to make US
dollar interest payments. Okay, so that
made all even though there was some
grumbling about why Micro Strategy has
Bitco has US dollars on their balance
sheet now, it makes all the sense in the
world and for all the people that were
worried that you know Micro Strategy
might not be able to make their interest
payments. Well, now they’re sitting on a
ton of US dollars to do exactly that. So
what are they worried about? Okay, so
secondly, because everybody on the
internet is click baiting everybody else
on the internet trying to drive up their
view counts and build a YouTube channel
and a Tik Tok channel and an Instagram
channel and all of that. In fact, the
one person on the internet that doesn’t
seem to be worried about building a
channel is me because usually in the
title of my videos, I tell you exactly
what I’m going to say. I label this
video Micro Strategy is not in trouble,
but I wouldn’t buy their stock. Now, if
I wanted you to buy to watch the whole
video, I wouldn’t put the label of what
I’m going to say in the title. I would
say is Micro Strategy in trouble? You
know, is it about to crash? Anyway, I
don’t do that because I’m not click
baiting, but a lot of people are. So
right now the average stock price or the
average Bitcoin price that Micro
Strategy has paid for their stock is
about $74,000.
So as the price dipped toward um toward
$80,000, people on, you know, the
internet were all going crazy with
clickbait saying Micro Strategy’s in
trouble if Bitcoin drops below $74,000.
The answer is no, they’re not. They
bought that Bitcoin. A ton of that
Bitcoin was bought way cheaper prices.
And nothing magical happens if the price
of Bitcoin drops below their cost basis.
So what? It doesn’t make a lick of
difference whether Bitcoin is trading
above or below their cost basis. Unless
the price of Bitcoin goes so low that
they can’t make their interest payments.
But now they have $ 1.5 billion set
aside to make their interest payments.
So there’s no reason to even worry about
that. So, everybody who is spreading
fear, uncertainty, and doubt about Micro
Strategy, it’s 100% clickbait. The whole
thing is BS. Micro Strategy is not going
to cause something negative to happen to
Bitcoin. Like, it’s all just fear,
uncertainty, and doubt that’s intended
to serve as clickbait to drive views
because everybody apparently is trying
to build their own channels. Okay. So
why if if Micro Strategy is not in
trouble and as of right now they are
trading below their net asset value, why
would I not recommend you buy Micro
Strategy stock instead of Bitcoin?
Because theoretically
each share of stock represents slightly
more Bitcoin than you could get by just
buying Bitcoin. The answer is because
there’s no guarantee the MNAV, the
multiple of net asset value will not
become even more negative than it is
right now. For significant periods of
time in 2022 and I think maybe even in
2023, Micro Strategy was trading
significantly below their net asset
value. There is no reason that could not
happen for a long time. So,
hypothetically, by using leverage, by
using their ability to borrow cheap
money in the global debt markets,
hypothetically,
Strategy could end up with more Bitcoin
per share by all of this, you know,
leverage that they use in the markets.
But the Bitcoin they own on their
balance sheet is also not liquid. That
650,000 Bitcoin, Michael Sailor has said
he’s never going to sell it. So when you
have an asset that is not liquid, it can
often and very regularly does trade
below na asset value. It is very common
for closedend funds, which are funds
where you put the money in, they buy a
bunch of stuff, but you’re not allowed
to get your money out until the end. It
is very common for closedend funds to
trade at a discount, even a significant
discount to their net net asset value,
their NAV. Now, why is that? Because
even if you have a real estate fund,
let’s say you have a real estate fund
with a billion dollars of real estate in
it, but the fund is a closedin fund that
is not liquid for 10 years. It might
trade at 800 million. It might trade at
only 80% of its net asset value. Not
because the real estate inside it’s not
worth a billion dollars, but because you
can’t get that liquidity. That real
estate inside it is not available to be
liquidated right now and you can’t get
your money out of the closed fund. So
Micro Strategy works similar to a
closed-end fund in that the Bitcoin
inside it is not liquid. Now the stock
price is and so you can get in and out
of the Micro Strategy stock price, but
there’s no guarantee you’re not going to
buy the Micro Strategy stock price at an
MNAV of 0.9 and be forced to sell it at
an MNAV of.7. And if if the if the stock
is trading at an MNAV lower than what
you paid for it, you’re going to lose a
lot of money. So, a ton of people did
this. A ton of people bought Micro
Strategy stock late last year and early
this year with the assumption that an
MNAV of 2.5x or it was above 2x. So,
they thought, hey, the MNAV’s above 2x,
it could go to above 3x or 4x.
Therefore, if I buy Micro Strategy, I
might end up with more Bitcoin. But
because the MNAV has gone from above 2x
to below 1x, everybody who bought Micro
Strategy stock in general has ended up
way down. Now, Micro Strategy has been
able to offset some of that loss by
increasing the Bitcoin per share, but
not anywhere close to all of that loss.
So, if you invested most of the last 12
or 18 months in Micro Strategy rather
than Bitcoin, you are way down on your
investment. Which is why back when I did
the very first video about Micro
Strategy, I said I would not buy their
stock. Buy Bitcoin. It’s simple. Buy
Bitcoin. Don’t buy derivatives of
Bitcoin. Don’t buy holding companies of
Bitcoin. Don’t buy Bitcoin treasury
companies. Don’t buy Bitcoin miners.
Don’t buy anything adjacent or around,
on top, below, behind, in front of,
left, right, Bitcoin. Buy Bitcoin, the
real thing. Buy it on Re River. Buy it
on Rob or uh, you know, Coinbase. The
best are River or if you can’t get River
to work, you know, Coinbase, but you can
also buy it on Strike. You can buy it on
Robin Hood. You can buy Bitcoin a lot of
places. Um, so the reason I’ve always
recommended you not buy Micro Strategy
stock is because of that MNAV
compression is because the MNAV, the
multiple of net asset value can go from
a higher number to a lower number, which
means you are losing money. So Micro
Strategy is not in trouble. They have
tons of money to pay their interest
payments. They are going to sit on that
$650,000 or 650,000 Bitcoin probably
forever. They’ll be fine. Michael
Sailor, the uh Michael Sailor is the
founder, CEO, and chairman. I guess he’s
not CEO now. He’s executive chairman.
So, he’s founder and executive chairman.
So, Michael Sailor is founder and
executive chairman of Micro Strategy. He
is a genius. Michael Sailor is an
absolute freaking genius. He has figured
out how to tap pools of capital all over
that do not have the ability to buy
Bitcoin. But he will be the first to
say, Michael Sailor himself will be the
first to say if you can buy Bitcoin, you
should do that. If you can’t buy Bitcoin
because you are a fund manager that can
only buy bonds or can only buy
convertible debt or that can only do
equity investments. If you are a fund
manager that cannot buy Bitcoin, then he
has a deal for you which is buy his
company stock or one of their bonds or
one of their variety of financial
instruments. So, even Michael Sailor
himself will say, “If you can buy
Bitcoin,” and I promise you, everybody
listening to this video can buy Bitcoin.
There’s nobody listening to this video
that’s a massive fund manager of
billions of dollars that can’t buy
Bitcoin. If that’s you, though, Micros
Micro Strategy has an incredible number
of of assets you can buy that are
basically indirect Bitcoin exposure. But
again, that applies to almost nobody
that’s actually listening to this video.
So, it is better to buy Bitcoin than to
buy Micro Strategy stock, which is MSTR.
So, I would not recommend people buy
MSTR stock, not because it can’t
outperform Bitcoin, but because it’s a
speculative bet and it can trade
significantly below net asset value for
a very long time and you can end up
absolutely down on a Bitcoin investment
as compared to a Bitcoin investment for
a very long time. So, buy Bitcoin, hold
on to it for as long as conceivably
possible. If you have a lot of Bitcoin,
put it in Bit Key, which is a lot more
secure than leaving it on River or
Coinbase or somebody else somewhere
else. Uh, and ignore the noise. Buy
Bitcoin. Hold on to it for as long as
conceivably possible. It’s not that
hard. The formula is simple. Micro
Strategy is not a problem. The Bitcoin
market is not going to tank because
something bad happens to Micro Strategy.
Nothing bad’s going to happen with Micro
Strategy. Doesn’t mean Bitcoin can’t go
up and down, but it’s not going to be
because of Micro Strategy.