US-based business intelligence firm MicroStrategy has announced an ambitious plan to increase its Bitcoin holdings. The company plans to raise $42 billion over the next three years, allowing it to acquire more Bitcoin assets.
The move comes as MicroStrategy’s stock value records a significant surge.
MicroStrategy’s $42 Billion Capital Plan
MicroStrategy’s newly announced “21/21 Plan” aims to raise $42 billion to support its continued Bitcoin acquisition. The company plans to split the funding between equity and fixed-income issuances. This is a considerable step forward from its earlier bitcoin-buying activity.
In addition, MicroStrategy’s CEO said, “We are basically creating leverage by tapping into the convertible bond market.”
The company has become one of the largest corporate bitcoin holders, and its stock price reflects that. CoinGecko data shows that the company is the largest public Bitcoin holder, controlling 252,220 BTCs. The latest capital plan will boost MicroStrategy’s Bitcoin holdings to 412,220 by 2025.
Meanwhile, the stock has recorded a year-to-day rise of 290%, vastly outperforming bitcoin’s 64% increase during the same period.
The company is betting on the future of BTC, with management predicting that the price will reach $175,000 by the same time.
MicroStrategy’s Bold Bitcoin Strategy
The company’s strategy has impressed analysts, who are optimistic about its potential to keep delivering solid results. Mark Palmer, a benchmark analyst, credits MicroStrategy’s impressive stock valuation to its unique strategy.
The company combines traditional financial tools with bitcoin. This offers a fresh approach that is different from other bitcoin exposure methods, such as spot BTC ETFs.
According to Palmer, this compounding approach is critical to MicroStrategy’s stock trading at 2.7 times its net asset value.
The company’s management has also emphasized the importance of having a clear, robust plan for raising capital to fuel its BTC strategy rather than relying on a less intentional approach.
MicroStrategy’s quarterly report shows sales of $116 million, which missed estimates slightly but reflects the company’s strong focus on its bitcoin strategy.
Its BTC Yield, a measure of its BTC strategy’s performance, stands at 17.8%. The company is now projecting that this yield will increase to 6-10% annually, a figure analysts find promising.
The move to raise $42 billion for bitcoin has generated considerable interest from investors and analysts alike. Palmer believes institutional demand for bitcoin could drive even further gains in MicroStrategy’s stock price.
He also noted that concerns over U.S. monetary policy and its potential for debasement may fuel more interest in BTC from institutional investors.
Alexander Blume, CEO of Two Prime Digital Assets, offered a different take on the company’s BTC Yield. He describes it as more of a “language-laundering” move to bring the company’s bitcoin net asset value (NAV) closer to its market cap.
Two Prime CEO @alexandersblume speaks with @TheBlock__ on MicroStrategy’s audacious $42 billion capital plan
Read more: https://t.co/QrTYQ5Ks4r
— Two Prime Digital Assets (@two_prime) October 31, 2024
According to Blume, while this strategy is clever, it remains risky, significantly if Bitcoin’s value drops sharply.
Regardless, MicroStrategy’s bold $42 billion capital plan highlights its ongoing commitment to BTC. While the plan carries risks, especially if Bitcoin’s value falls, many analysts believe the company is well-positioned to benefit from increasing institutional interest.
