MicroStrategy Inc. MSTR is considering increasing its leveraged bets on Bitcoin BTC/USD, signaling its readiness to amplify a strategy that has already inflated its Bitcoin holdings to over $14 billion.
What Happened: On Monday, during the first quarter earnings call, MicroStrategy’s executives championed an “intelligent leverage” approach to acquiring more Bitcoin.
The company’s President and CEO, Phong Le, suggested that if the market value of their Bitcoin increases, it would create more opportunities to manage their leverage targets.
Le said, “With the opportunity to take on more leverage in a prudent risk-managed fashion, the value generated from our increasing Bitcoin holdings would be expected to outperform even further if Bitcoin prices continue to rise.”
MicroStrategy’s unconventional strategy involves issuing billions in debt and equity to acquire more Bitcoin whenever prices dip.
The company, a strong believer in Bitcoin’s long-term potential, held about 214,400 Bitcoins worth $14 billion as of late April after deploying $1.6 billion in cash raised from recent debt and stock offerings to purchase over 25,000 more coins in the first quarter.
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Despite Bitcoin’s 60% surge in 2024, MicroStrategy’s leveraged approach has drawn criticism from analysts concerned about the company’s heightened risk exposure should prices crash again.
MicroStrategy offered illustrations showing how leverage could boost investor returns exponentially if Bitcoin prices were to theoretically reach $250,000, underscoring the company’s conviction in its debt-fueled acquisition strategy.
Executive Chairman Michael Saylor claimed the company’s corporate structure and access to capital markets give it a strategic edge over other firms in accumulating Bitcoin.
“We are a public company and an operating company, and that gives us flexible, active control over our capital structure,” Saylor stated on the call. “We wouldn’t have been able to raise as much capital without volatility.”
Why It Matters: MicroStrategy reported its first-quarter financial results, which showed a 5.51% decrease in sales year-over-year. Despite this, the company’s Bitcoin holdings have continued to grow.
Saylor has previously highlighted the unique advantages that MicroStrategy has over its competitors, such as the ability to leverage its stock, offer options, and issue convertible debt.
MSTR Price Action: According to Benzinga Pro, MicroStrategy shares are down 2.63% after-hours at $1,259 at the time of publication.
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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