Microstrategy Not Overvalued, Instead Has A Lot Of Runway, Says Charles Edwards

In the latest development, MicroStrategy, which is the largest publicly traded corporate holder of Bitcoin, has witnessed its stock surge by a massive 94% year-to-date (YTD), driven by Bitcoin’s rally above $97,000. Strikingly, with 331,200 Bitcoin on its balance sheet, valued at around $32 billion, MicroStrategy now has an impressive $15.51 billion in unrealized gains.

Notably, the rise in MicroStrategy’s stock reflects the increasing integration of cryptocurrencies into traditional finance and growing investor demand for Bitcoin-backed equities. MSTR’s year-to-date performance has outperformed major tech stocks, including Apple by 21%, Amazon by 24% and Tesla by 6%.

However, despite its strong performance, MicroStrategy’s reliance on Bitcoin exposes it to market volatility. A substantial drop in Bitcoin’s price could quickly bring down the company’s valuation and stock price.

Is Microstrategy Overvalued?

While many in the market are of the opinion that MicroStrategy is overvalued, Charles Edwards, the founder of Capriole Investments has a different opinion.

In a latest X post, he explained how it is not overvalued. He noted that at $106B market cap and a 70% premium to MSTR’s Bitcoin NAV, it could not be undervalued. He underscored that with the current bull run going strong, if this Bitcoin cycle is anything like the last (and even if its worse) and if Saylor keeps buying, then MSTR has a lot of ‘runway’.

The Key Requirement

However, he noted the key requirement for it to happen is that Saylor needs to buy Bitcoin more aggressively the wider their NAV premium is. The firm recently announced its $42 billion acquisition plan, also known as the 21/21 plan. However, Charles notes that the plan will not work anymore as the market has already priced it in. Therefore, he noted that we should be looking for upwards of $50 billion over the next year.

While that may seem like a lot, Charles pointed out that Saylor has already raised $9.6B in the last 9 days alone. Bitcoin will soon be over $2 trillion, and there’s a massive audience of bond traders that can’t access Bitcoin due to their investment mandate, Charles remarked.

Saylor Needs To Raise More Capital

Notably, the US bond market is $50T, which is more than 25 times the size of Bitcoin. He highlighted that currently, MSTR is one of the only vehicles that gives bond traders exposure to Bitcoin. With MSTR issues being constantly oversubscribed, there is a massive of demand here for the best-performing bonds in the world.

“So yes, as this Bitcoin bull cycle unfolds, it’s easy to imagine a measily $50B being allocated to capture some of that upside via MSTR. Not to mention the capital-raising potential from equity issues as well,” Charles explained.

He believes that Saylor needs to keep busy over the next year to actively close the premium by raising more capital, but provided he does, there’s potential for MSTR equity yet. Either way, he noted that there is a massive Bitcoin buyer in the market that is about to go into overdrive.