MicroStrategy is NOT in trouble! But I still would not buy their stock (MSTR)

Micro Strategy, also called Strategy, is not in trouble, but I still would not buy their stock. Let's talk about it. Because Micro Strategy, also known as Strategy, owns more Bitcoin than any other organization in the entire world, more than any other company, more than any other country. Uh, Strategy owns more Bitcoin than anyone, and like bar none. Okay. So, how did they acquire $650,000 Bitcoin, which is $55 billion of Bitcoin? Well, first of all, they have a profitable software company. And so, they started using the profits of the software company to buy Bitcoin back in the year 2020, so about five plus years ago. Then, when that wasn't enough, they issued more stock of their company to the market and used it to buy Bitcoin, which made their stock price go up. So, they issued even more stock to the market to buy more Bitcoin. It's what's uh known or became known as an infinite money glitch, which is you issue your stock to the market, you use the proceeds to buy Bitcoin, then you issue more stock, use it to buy Bitcoin, rinse, repeat, rinse, repeat, rinse, repeat. Obviously, it's dilutive to your existing shareholders, but they're getting more Bitcoin. So, over time, you end up with more, if you do it creatively, you can end up with more Bitcoin per share. Uh that's called BPS, Bitcoin per share, uh as people have come to call it. Okay. So, one second here. So, with more Bitcoin per share, um hypothetically, it makes sense to own the stock because the stock could be could be worth more than the holdings of the Bitcoin. And initially, it was when Micro Strategy started doing this that the MNAV, which is the multiple to net asset value. NAV is net asset value. So MNAV is the multiple of the net asset value and normally it would be one, right? So if I came to you and said, I have a special stock that represents a $20 bill. Well, guess how much that special stock is worth? It's worth 20 bucks because the only thing I own is a $20 bill and I have one share of stock that represents ownership in that $20 bill. So that should be, you know, $20. But if I tell you I have a very creative and roundabout way of resulting in getting more than $20, well then the stock should be worth more than $20 because even if I only have $20 now, if I have the ability to turn that $20 into $30, then the stock could be worth $30. So Bitco uh so Micro Strategy has historically traded for most of their life above their MNAV. their their multiple of net asset value has been above one, meaning the value of the company has been worth more than all of the Bitcoin they own. Now, part of that is because they still have a very small software company attached to everything else they're doing, which is effectively irrelevant at this point, but regardless, they still do have a software company that's not worth zero. But mainly, it has been due to people understanding that they can use leverage. leverage meaning bit uh Micro Strategy is a publicly traded company which means they can borrow money on the public debt markets really cheap and they have done that they have now borrowed like $9 billion to buy more Bitcoin in addition to all the stock of their company that they have issued to buy more Bitcoin as well. So they now have $9 billion of debt. Well, why is that a problem? Well, because they their assets there is an imbalance between their assets and their liabilities. Their liabilities are $9 billion of US dollars that they owe. Their assets are $55 billion of Bitcoin. Now, obviously, you can convert Bitcoin to dollars and back and forth again. So, technically they are over collateral over collateralized by a massive margin. I think I forget what the exact ratio is, but anyway, they they publicize their exact it's whatever I don't know 55 billion divide by 9 is whatever that is. I'm not going to do math in my head. Um, so anyway, they're massively overcolaterized, but they're collateralized in an asset that is different than what they owe. So, recently they had an assessment by an organization that rates their bonds and they got a poor assessment because they said, "Hey, you owe $9 billion, but you don't have any US dollars. You have a ton of Bitcoin, but you don't have bit you don't have US dollars. So, how do we know you can pay your bonds if you only own Bitcoin? And what if the Bitcoin goes down? Okay, so Micro Strategy uh what is today? Monday, Friday, whatever. Earlier this week, I guess it was earlier this week. Yeah. So, earlier this week, Micro Strategy raised $1.5 billion of US dollars. They used some of it to buy Bitcoin and they kept the rest of it in a US dollar reserve that was earmarked to pay debt payments on their US dollars. So now they have 21 months of interest payments set aside. So now when the bond rating agencies come along, they can look at Micro Strategy and they they can say, "Hey, you owe $9 billion, but you have $1.5 billion to make interest payments." Which means at a minimum you're not going to be in trouble for a couple of years. you could survive a uh Bitcoin bare market that lasts for more than two years because you have enough US dollars to pay those dividends payments. Now, some people were belly aching about that about why is Micro Strategy the biggest Bitcoin booster in the world owning US dollars? The answer is because they borrowed US dollars. And if your interest payments are denominated in US dollars and you have a sizable amount of them to make, in this case more than $800 million of US dollar interest a year, then it would be prudent, especially if you're trying to get a high credit rating rating agency rating, it'd be prudent to have some US dollars set aside to pay for those uh interest payments so that you're not stuck selling Bitcoin at a steeply discounted price to make US dollar interest payments. Okay, so that made all even though there was some grumbling about why Micro Strategy has Bitco has US dollars on their balance sheet now, it makes all the sense in the world and for all the people that were worried that you know Micro Strategy might not be able to make their interest payments. Well, now they're sitting on a ton of US dollars to do exactly that. So what are they worried about? Okay, so secondly, because everybody on the internet is click baiting everybody else on the internet trying to drive up their view counts and build a YouTube channel and a Tik Tok channel and an Instagram channel and all of that. In fact, the one person on the internet that doesn't seem to be worried about building a channel is me because usually in the title of my videos, I tell you exactly what I'm going to say. I label this video Micro Strategy is not in trouble, but I wouldn't buy their stock. Now, if I wanted you to buy to watch the whole video, I wouldn't put the label of what I'm going to say in the title. I would say is Micro Strategy in trouble? You know, is it about to crash? Anyway, I don't do that because I'm not click baiting, but a lot of people are. So right now the average stock price or the average Bitcoin price that Micro Strategy has paid for their stock is about $74,000. So as the price dipped toward um toward $80,000, people on, you know, the internet were all going crazy with clickbait saying Micro Strategy's in trouble if Bitcoin drops below $74,000. The answer is no, they're not. They bought that Bitcoin. A ton of that Bitcoin was bought way cheaper prices. And nothing magical happens if the price of Bitcoin drops below their cost basis. So what? It doesn't make a lick of difference whether Bitcoin is trading above or below their cost basis. Unless the price of Bitcoin goes so low that they can't make their interest payments. But now they have $ 1.5 billion set aside to make their interest payments. So there's no reason to even worry about that. So, everybody who is spreading fear, uncertainty, and doubt about Micro Strategy, it's 100% clickbait. The whole thing is BS. Micro Strategy is not going to cause something negative to happen to Bitcoin. Like, it's all just fear, uncertainty, and doubt that's intended to serve as clickbait to drive views because everybody apparently is trying to build their own channels. Okay. So why if if Micro Strategy is not in trouble and as of right now they are trading below their net asset value, why would I not recommend you buy Micro Strategy stock instead of Bitcoin? Because theoretically each share of stock represents slightly more Bitcoin than you could get by just buying Bitcoin. The answer is because there's no guarantee the MNAV, the multiple of net asset value will not become even more negative than it is right now. For significant periods of time in 2022 and I think maybe even in 2023, Micro Strategy was trading significantly below their net asset value. There is no reason that could not happen for a long time. So, hypothetically, by using leverage, by using their ability to borrow cheap money in the global debt markets, hypothetically, Strategy could end up with more Bitcoin per share by all of this, you know, leverage that they use in the markets. But the Bitcoin they own on their balance sheet is also not liquid. That 650,000 Bitcoin, Michael Sailor has said he's never going to sell it. So when you have an asset that is not liquid, it can often and very regularly does trade below na asset value. It is very common for closedend funds, which are funds where you put the money in, they buy a bunch of stuff, but you're not allowed to get your money out until the end. It is very common for closedend funds to trade at a discount, even a significant discount to their net net asset value, their NAV. Now, why is that? Because even if you have a real estate fund, let's say you have a real estate fund with a billion dollars of real estate in it, but the fund is a closedin fund that is not liquid for 10 years. It might trade at 800 million. It might trade at only 80% of its net asset value. Not because the real estate inside it's not worth a billion dollars, but because you can't get that liquidity. That real estate inside it is not available to be liquidated right now and you can't get your money out of the closed fund. So Micro Strategy works similar to a closed-end fund in that the Bitcoin inside it is not liquid. Now the stock price is and so you can get in and out of the Micro Strategy stock price, but there's no guarantee you're not going to buy the Micro Strategy stock price at an MNAV of 0.9 and be forced to sell it at an MNAV of.7. And if if the if the stock is trading at an MNAV lower than what you paid for it, you're going to lose a lot of money. So, a ton of people did this. A ton of people bought Micro Strategy stock late last year and early this year with the assumption that an MNAV of 2.5x or it was above 2x. So, they thought, hey, the MNAV's above 2x, it could go to above 3x or 4x. Therefore, if I buy Micro Strategy, I might end up with more Bitcoin. But because the MNAV has gone from above 2x to below 1x, everybody who bought Micro Strategy stock in general has ended up way down. Now, Micro Strategy has been able to offset some of that loss by increasing the Bitcoin per share, but not anywhere close to all of that loss. So, if you invested most of the last 12 or 18 months in Micro Strategy rather than Bitcoin, you are way down on your investment. Which is why back when I did the very first video about Micro Strategy, I said I would not buy their stock. Buy Bitcoin. It's simple. Buy Bitcoin. Don't buy derivatives of Bitcoin. Don't buy holding companies of Bitcoin. Don't buy Bitcoin treasury companies. Don't buy Bitcoin miners. Don't buy anything adjacent or around, on top, below, behind, in front of, left, right, Bitcoin. Buy Bitcoin, the real thing. Buy it on Re River. Buy it on Rob or uh, you know, Coinbase. The best are River or if you can't get River to work, you know, Coinbase, but you can also buy it on Strike. You can buy it on Robin Hood. You can buy Bitcoin a lot of places. Um, so the reason I've always recommended you not buy Micro Strategy stock is because of that MNAV compression is because the MNAV, the multiple of net asset value can go from a higher number to a lower number, which means you are losing money. So Micro Strategy is not in trouble. They have tons of money to pay their interest payments. They are going to sit on that $650,000 or 650,000 Bitcoin probably forever. They'll be fine. Michael Sailor, the uh Michael Sailor is the founder, CEO, and chairman. I guess he's not CEO now. He's executive chairman. So, he's founder and executive chairman. So, Michael Sailor is founder and executive chairman of Micro Strategy. He is a genius. Michael Sailor is an absolute freaking genius. He has figured out how to tap pools of capital all over that do not have the ability to buy Bitcoin. But he will be the first to say, Michael Sailor himself will be the first to say if you can buy Bitcoin, you should do that. If you can't buy Bitcoin because you are a fund manager that can only buy bonds or can only buy convertible debt or that can only do equity investments. If you are a fund manager that cannot buy Bitcoin, then he has a deal for you which is buy his company stock or one of their bonds or one of their variety of financial instruments. So, even Michael Sailor himself will say, "If you can buy Bitcoin," and I promise you, everybody listening to this video can buy Bitcoin. There's nobody listening to this video that's a massive fund manager of billions of dollars that can't buy Bitcoin. If that's you, though, Micros Micro Strategy has an incredible number of of assets you can buy that are basically indirect Bitcoin exposure. But again, that applies to almost nobody that's actually listening to this video. So, it is better to buy Bitcoin than to buy Micro Strategy stock, which is MSTR. So, I would not recommend people buy MSTR stock, not because it can't outperform Bitcoin, but because it's a speculative bet and it can trade significantly below net asset value for a very long time and you can end up absolutely down on a Bitcoin investment as compared to a Bitcoin investment for a very long time. So, buy Bitcoin, hold on to it for as long as conceivably possible. If you have a lot of Bitcoin, put it in Bit Key, which is a lot more secure than leaving it on River or Coinbase or somebody else somewhere else. Uh, and ignore the noise. Buy Bitcoin. Hold on to it for as long as conceivably possible. It's not that hard. The formula is simple. Micro Strategy is not a problem. The Bitcoin market is not going to tank because something bad happens to Micro Strategy. Nothing bad's going to happen with Micro Strategy. Doesn't mean Bitcoin can't go up and down, but it's not going to be because of Micro Strategy.