Why MicroStrategy Stock Tanked by 11% on Thursday

The shorts are coming for MicroStrategy (NASDAQ: MSTR), and investors reacted accordingly on Thursday — well, at least one short seller, which made no bones about what it currently thinks of the tech company-turned-Bitcoin (CRYPTO: BTC) accumulator. As a result, MicroStrategy’s share price fell at a double-digit rate, closing more than 11% lower.

Short the stock now, says investment firm

Kerrisdale Capital, an investment firm based in New York City, published a report lambasting MicroStrategy while recommending that investors go long on Bitcoin.

Kerrisdale cheekily sub-titled the report “Know When to HODL, Know When to FODL,” a play on the “hold on for dear life” acronym that is a favorite of crypto investors.

The firm is short on MicroStrategy and long on Bitcoin, and it did not mince words about the former. Due to the surging popularity of the leading cryptocurrency, MicroStrategy’s shares have generally been on a sharp ride upwards lately.

Kerrisdale is uncomfortable with this, writing that

The bitcoin price currently implied by MicroStrategy’s stock is now over $177,000, i.e., two and a half times the spot price of bitcoin. The days when MicroStrategy shares represented a rare, unique way to gain access to bitcoin are long over.

The investment firm also pointed out that MicroStrategy’s original business, software analytics, currently comprises only 3% of its enterprise value.

MicroStrategy has not yet officially responded to the Kerrisdale report.

Bound tightly to Bitcoin

Short sellers tend to get outsized attention, as they are often scathingly critical of the stocks they are shorting. Yet Kerrisdale makes several valid points about MicroStrategy, particularly about how the shares were seen by some investors as a proxy for direct Bitcoin ownership. The company remains heavily dependent on the performance of Bitcoin since it’s overwhelmingly its major asset, a situation that might not sit comfortably with many.

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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Why MicroStrategy Stock Tanked by 11% on Thursday was originally published by The Motley Fool

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