• CoinSnacks
  • Posts
  • Kerrisdale Capital Puts on Long BTC Short Microstrategy Trade

Kerrisdale Capital Puts on Long BTC Short Microstrategy Trade

The firm claims that the trading price of Microstrategy’s stock implies a valuation of the bitcoin it holds at over $177,000 – more than 2x the current price of BTC. 

Author

Dillon Newman
March 28, 2024 • Estimated Reading Time: 2 minutes

Prominent short seller, Kerrisdale Capital, announced that they have put on a pair trade in which they are long Bitcoin and short Microstrategy (MSTR). 

The firm claims that the trading price of Microstrategy’s stock implies a valuation of the bitcoin it holds at over $177,000 – more than 2x the current price of BTC. 

Prior to 2024, MicroStrategy was the prominent way for investors to bet on bitcoin without holding the underlying asset. The company repeatedly issued debt to finance its purchases of bitcoin accruing more than 1% of all bitcoin with 200,000+ tokens. 

But with vehicles such as spot bitcoin ETFs readily available at low expense ratios, Kerrisdale argues that there is no longer a reason for Microstrategy to command a premium to the assets it holds. 

“The days when MicroStrategy shares represented a rare, unique way to gain access to bitcoin are long over. Bitcoin is now easily obtainable through brokerages, crypto exchanges, and more recently low fee ETPs and ETFs. None of the reasons commonly provided for MicroStrategy’s relative attractiveness justify paying well over double for the same coin.”

Kerrisdale also dismisses other arguments as to why Microstrategy should hold a premium, such as the company’s legacy tech business stating that “free cash flow from the software business was only $10m in 2023, enough to tack on 0.1% more bitcoin to MicroStrategy’s current holdings.”

Kerrisdale Capital was founded by Sahm Adrangi in 2009 with less than $1 million. By 2012 the fund was recognized as one of the best-performing hedge funds. Today the fund manages over $600 million.

Microstrategy shares are down more than 10% on Kerrisdale’s report. 


Investment Opportunities From Our Partners