MicroStrategy (MSTR) is walking a tightrope using leverage to buy Bitcoin

In the past few months, there has been a lot of excitement surrounding MicroStrategy, but not because of its software. Instead, MicroStrategy has become the largest holder of Bitcoin and is using this massive holding to lock in shareholder value. However, as long as Bitcoin rises, shareholder value also rises, making MicroStrategy a somewhat unique bet in the world of cryptocurrencies.

MicroStrategy Incorporated (MSTR) is an American company specializing in business intelligence, mobile software, and cloud-based services. Founded in 1989, the company is headquartered in Tysons Corner, Virginia. The force has advanced analytical capabilities combined with a strong focus on data-driven decision making for business organizations. It provides services in enterprise analytics but has recently been focusing on Bitcoin acquisitions.

MicroStrategy’s main product releases consist of its analytics platform: data visualization, reporting, and dashboard viewing. The company provides cloud solutions, consulting services, and technical support to companies wanting to implement and simplify analytics capabilities. Revenue is primarily generated from software licensing fees, cloud subscription fees, consulting, and technical support contracts. It serves a wide range of clients, including retail organizations, banks, healthcare companies, communications agencies and others. The end market consists of companies seeking to enhance their operations by harnessing data analytics.

The company recently bought $1.5 billion worth of Bitcoin and could be adding to that as we speak. The total holding now stands at 439,000 Bitcoin, which is currently valued at $42.5 billion. At one point, the company’s BTC holding was worth close to $48 billion. The company now wants to use more leverage to buy more Bitcoin, but how much is enough for MSTR? And is it really a good idea to use leverage to buy Bitcoin? The company has already issued $6.2 billion in convertible debt this year and plans to continue doing the same.

Investors are wondering whether “smart leverage,” a term just coined by Chairman Michael Saylor, is a good thing. One can understand someone buying a house with leverage. It is a useful asset that can come in handy if one is going through tough times. But how can you justify buying Bitcoin with leverage, when it is an asset that is just as volatile as gold, useless in bad times? Smart investors will know that whatever the mathematics behind Bitcoin, the mathematics behind the risk will eventually come back to haunt them. As long as Bitcoin continues to rise, this could be a great stock to add to a portfolio. However, we expect a bearish long-term outlook for the company due to its leveraged Bitcoin spending spree.

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