Mar 28 2024: Kerrisdale Capital, a prominent investment firm, announced its unusual position on Thursday, revealing that it is shorting shares of MicroStrategy, Inc. (NASDAQ:MSTR), while simultaneously holding a bullish stance on Bitcoin.
The firm’s decision stems from its assessment of the unjustified premium at which MicroStrategy’s shares are trading compared to the underlying digital asset, Bitcoin.
Despite the recent surge in Bitcoin’s value, Kerrisdale Capital argues that MicroStrategy’s stock price, trading at a premium of more than two and a half times the spot price of Bitcoin, is unsustainable. This premium, once seen as a unique gateway to Bitcoin investment, is now deemed excessive by Kerrisdale Capital in light of the expanding accessibility of cryptocurrencies through various platforms.
Kerrisdale Capital’s note emphasizes the evolving landscape of cryptocurrency investment, highlighting the ease of access provided by brokerages, crypto exchanges, and low-fee investment products, which have diminished the appeal of MicroStrategy’s shares as a Bitcoin proxy.
The firm’s position is rooted in the belief that the inflated premium on MicroStrategy’s shares is poised to decrease, presenting an attractive “compelling opportunity” for a pair trade strategy.
Kerrisdale Capital’s thesis revolves around the distortion in the relationship between Bitcoin and MicroStrategy, projecting a potential 50% return if the premium to net asset value reverts to historically consistent averages.
