Michael Saylor, the Chairman of MicroStrategy Inc., has emerged as a key steward of the crypto space, evangelizing Bitcoin buying even in the depths of crypto winter. Although he remains an ardent supporter of Bitcoin, shockwaves have been sent through the market, as news breaks that Saylor has began selling MSTR stock.
A whirlwind of criticism and concern has been whipped up by the bold move, which saw Saylor sell 1,550 MSTR – 10% of his Microstrategy holdings.
This also comes immediately after MicroStrategy issued two convertible notes – an $800m offering and a $525m offering. The public firm has raised funds through this model to accumulate even more BTC.
Michael Saylor Is Pumping Bitcoin (BTC) And Dumping Microstrategy (MSTR) Stock
Despite Saylor’s public optimism about Bitcoin, his recent actions contradict this stance. Data reveals that Saylor has sold more than 220,000 MSTR stock valued at over $195 million in the past year alone.
(Source).
On March 14, a United States Securities and Exchange Commission (SEC) filing showed that Saylor sold 2,312 shares of MSTR worth slightly over $4 million.
Interestingly, during this period of selling MSTR, Saylor did not make any stock purchases. This apparent contradiction raises questions about his confidence in MicroStrategy’s long-term prospects.
Economists believe that MicroStrategy’s stock is trading at a significantly high premium compared to the value of its underlying assets, primarily Bitcoin.
According to Alpha Spread, MicroStrategy is overvalued by at least 94%. This potential overvaluation, analysts believe, can be seen as a red flag. If the MSTR price retraces to reflect the true value of its assets, investors buying at spot rates might see huge losses.
Michael Saylor is pumping Bitcoin on the media every single day & selling convertible notes to buy more $BTC.
So why is he then selling 5000 shares of his $MSTR stock everyday for a cumulative $195m of stock sold YTD? This is almost a $1bn annual run rate fwiw.
Let's see what… pic.twitter.com/gRLjocRiea
— Capital Misallocation (@BenBrey) March 18, 2024
Moreover, at this premium level, the analyst argues that investors channeling funds via convertible notes and fanning MicroStrategy’s accumulation of BTC are paying a high markup.
A cheaper alternative for these investors would be to buy Bitcoin directly from secondary markets like Coinbase or Binance or even get exposure through a low-cost exchange-traded fund (ETF) like BlackRock’s IBIT.
So With Saylor Selling – What’s Going On At MicroStrategy?
Considering the ultra-high premium and Saylor’s apparent shift into distribution for MSTR stock, the analyst thinks MicroStrategy’s strategy resembles a “flywheel” or a “Ponzi scheme.”
By issuing convertible notes, buying Bitcoin, and Saylor concurrently dumping his stock at a premium while pumping Bitcoin prices, they create a cycle that only serves to pump MSTR prices.
The big question is whether this model is sustainable. Presently, Bitcoin is trading near record highs following the new all-time high of $73,737 last week.
However, there are tell-tale signs that the market is uncertain here, for instance, Bitcoin’s implied volatility remains extremely high as markets trade with caution.
Moreover, prices have been sharply dropping in recent days as Bitcoin has shifted into consolidation. Find out more in: Our Weekly Bitcoin On-Chain Deep Dive.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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