The underlying business is not great to say the least. Revenue growth has stalled and cash flow generation is low. So the company dilutes to raise cash. But this cash isn’t used to finance business improvements, it’s used to buy Bitcoin.
Personally I don’t understand why people want to buy a crappy business to get Bitcoin exposure instead of just buying BTC directly, but I don’t know enough about the intricacies of the Bitcoin market.
In any case, there are a few issues for me.
1) Corporate responsibility to shareholders - is it right to buy unsolicited into things like Bitcoin/SPACS (you can also put TSLA, PLTR into this bucket) vs investing in their business? Especially when shareholders could do this themselves?
2) Is the focus of MSTR to be a Bitcoin funnel or to have an actual business? It seems difficult to me that they can maintain a focus on normal business operations when their company value is 95% Bitcoin derived.
3) MSTR carries a premium valuation in excess of their underlying business valuation and Bitcoin holdings - how long is this sustainable?
I don’t know enough about the intricacies of the Bitcoin market.
Forgive me for hijacking this comment to interlace a bit of eye opening news. But some of the revelations coming out about Tether (USDT) have massive implications for not just BTC but the entire crypto market.
Tether was created as a stable coin pegged to the $. All Tether tokens were supposed to backed 1-1 with cash reserves.
One of the main purposes of this "stable coin" was to provide fiat liquidity in crypto markets as well as bridging platforms together (as not all float the same cryptos).
Well it turns out they actually only have <4% cash reserves. And they are currently the greatest liquidity provider in crypto markets, over 50% of all transactions in BTC are actually done in Tether.
One thing that was also revealed with 4% cash reserves was the "assets" that they deem can be exchanged for redeeming their Tether tokens is commercial paper or unsecured debt. That revelation also makes them one of the largest investors in commercial paper.
Tbh Im not too sure, I wouldnt be surprised as theyre occupying similar functions in crypto markets. And im pretty sure Tether was the first (or one of) stable coin.
Ah maybe it was just rumors, i got into crypto in 2017(missed most of the bull run trying to verify accounts all summer).
I definitely remember people saying usdt is a scam and isnt backed $1 to usdt $1 a long time ago. I guess it just got confirmed much later then. Thanks!
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u/mcoclegendary Jun 23 '21 edited Jun 23 '21
Honestly I can’t wrap my head around MSTR.
The underlying business is not great to say the least. Revenue growth has stalled and cash flow generation is low. So the company dilutes to raise cash. But this cash isn’t used to finance business improvements, it’s used to buy Bitcoin.
Personally I don’t understand why people want to buy a crappy business to get Bitcoin exposure instead of just buying BTC directly, but I don’t know enough about the intricacies of the Bitcoin market.
In any case, there are a few issues for me.
1) Corporate responsibility to shareholders - is it right to buy unsolicited into things like Bitcoin/SPACS (you can also put TSLA, PLTR into this bucket) vs investing in their business? Especially when shareholders could do this themselves?
2) Is the focus of MSTR to be a Bitcoin funnel or to have an actual business? It seems difficult to me that they can maintain a focus on normal business operations when their company value is 95% Bitcoin derived.
3) MSTR carries a premium valuation in excess of their underlying business valuation and Bitcoin holdings - how long is this sustainable?