Bernstein Report: MicroStrategy Leads Bitcoin Market, Stock Price Target to $2,890

According to Coindesk, citing a research report from Wall Street investment bank Bernstein, software company MicroStrategy, which has been heavily buying Bitcoin since 2020, has become the only company to develop convertible bonds related to Bitcoin through a long-term convertible debt strategy, leading the way in the Bitcoin capital markets.

MicroStrategy is Pioneering the Bitcoin Capital Market

Bernstein analysts Gautam Chhugani and Mahika Sapra were quick to praise MicroStrategy, stating that the company is pioneering and leading the global Bitcoin capital market:

Michael Saylor's company is the only one that has developed Bitcoin-related convertible bonds to meet institutional demand.

Reportedly, the company has raised over $4 billion through issuing convertible bonds, which the two analysts expect to be used to purchase Bitcoin and continue fundraising to increase reserves.

MicroStrategy Saves Nearly $7 Million in Interest Through Forced Conversion of Convertible Bonds

Currently, MicroStrategy holds approximately 214,000 Bitcoins worth around $14.5 billion, accounting for 1% of the total Bitcoin circulation.

Bernstein: MicroStrategy's Target Price is $2,890

Regarding MicroStrategy's convertible bond strategy, Bernstein points out that as Bitcoin rises, the company will have more room to issue new bonds; conversely, when cryptocurrencies fall, the company can also issue new shares to reduce leverage.

The two analysts emphasize that MicroStrategy's flexible use of equity and debt financing methods has led to an increase of nearly 67% in Bitcoin holdings per share over the past 4 years:

MicroStrategy's long-term convertible debt strategy allows the company to benefit from potential Bitcoin price increases while also controlling the liquidation risk of cryptocurrencies on its balance sheet.

Earlier in March, a detailed analysis of MicroStrategy's issuance of convertible bonds was conducted, aligning with Bernstein's findings.

How Does MicroStrategy's Issuance of Convertible Bonds Work with Low Interest Rates and High Stock Conversion Prices?

Ultimately, Bernstein rates MicroStrategy's stock better than the market with a target price of $2,890, compared to the current price of around $1,469.

Is the Bitcoin Strategy Still Effective?

However, MicroStrategy's Bitcoin strategy is not without its drawbacks. The issuance of new shares through the conversion of convertible bonds will dilute shareholder equity, reduce earnings per share (EPS), impact investor stock price expectations, and cause a decline.

Perhaps due to the fact that the company's "Bitcoin strategy" has been exposed, it is also one of the main short-selling targets for several institutions, with a total of 24 short positions on MicroStrategy in the market, the largest net short position being approximately $2.4 billion.

Bitcoin Takes Me to the Sky! What is MicroStrategy's Bitcoin Strategy Really About?

In March of this year, investment firm Kerrisdale Capital also mentioned in a research report that MicroStrategy has seen a significant premium compared to Bitcoin:

Once the Bitcoin spot ETF is launched, the era of buying MicroStrategy to obtain Bitcoin exposure will be gone forever, and the company's so-called "Bitcoin strategy" era will come to an end.

MicroStrategy Faces Bearish Sentiments from Short-Selling Institution Kerrisdale Capital, Leading to an 11% Stock Price Drop