To The Moon

MicroStrategy ( $Strategy(MSTR)$ ), under the leadership of its Executive Chairman, Michael Saylor, has executed one of the most audacious corporate strategies in recent history. It has transformed itself from a modest enterprise software company into a de facto holding company for Bitcoin, making its stock a widely used, albeit complex, proxy for the digital asset. Analysing MicroStrategy requires abandoning traditional corporate valuation methods and instead deconstructing the enterprise into its parts to understand the true drivers of its stock price: its Bitcoin holdings, its use of leverage, and the speculative premium at which it trades.

The Saylor Doctrine: A Strategy of Perpetual Accumulation

Since initiating its Bitcoin treasury strategy in August 2020, MicroStrategy's singular focus has been the relentless acquisition of BTC, funded almost entirely by external capital. As of late July 2025, the company holds a staggering 607,770 BTC, making it the largest corporate holder of Bitcoin by a wide margin. This accumulation has been financed through a continuous and sophisticated series of capital markets activities, including at-the-market (ATM) equity offerings, the issuance of convertible senior notes, and, more recently, perpetual preferred stock.  

The company's Q1 2025 earnings report, released on May 1, 2025, serves as a stark illustration of this strategy in action. During the quarter, the company raised billions of dollars through these various instruments to fund further Bitcoin purchases. Meanwhile, its legacy software business, the original foundation of the company, saw its revenues decline by 3.6% year-over-year to a mere $111.1 million. This juxtaposition makes it unequivocally clear that the operational performance of the software business is a rounding error in the company's overall valuation and is almost entirely irrelevant to the investment thesis. The company has further telegraphed its intentions with an ambitious "42-42 capital plan," which aims to raise a total of $84 billion through equity and fixed income instruments by the end of 2027 for the sole purpose of continued Bitcoin accumulation.  

Deconstructing the Enterprise: A Sum-of-the-Parts (SOTP) Valuation

Given that MicroStrategy is effectively a company with two distinct and unrelated assets—a massive Bitcoin treasury and a small software business—a Sum-of-the-Parts (SOTP) valuation is the only intellectually honest method to determine its intrinsic worth. This approach involves valuing each component separately and then adjusting for corporate-level assets and liabilities to arrive at a Net Asset Value (NAV).  

The table below presents an SOTP valuation based on the most recent available data. This calculation is designed to isolate the underlying value of the company's assets, which can then be compared to its public market capitalisation to quantify the premium or discount at which the stock trades.

This SOTP analysis reveals a stark reality: MicroStrategy's stock trades at a staggering premium of approximately 85% over the intrinsic value of its underlying assets. This premium is the central paradox of the MSTR investment case.

The Premium Paradox: Analysing MSTR's Valuation Anomaly

The existence of such a large and persistent premium demands a thorough explanation. It is not an accounting anomaly but a market-driven phenomenon fueled by a confluence of factors. Analysts at VanEck have identified four key drivers that contribute to this premium :  

1. Expectations of Future Accumulation: The market is not just valuing the Bitcoin MSTR holds today, but also the Bitcoin it is expected to acquire in the future. The company's "Bitcoin Yield" strategy—using its capital markets access to increase the amount of BTC backing each share—is a core part of its narrative and is priced into the stock.

2. Limited Access for Certain Investors: Historically, MSTR was one of the few ways for investors to gain Bitcoin exposure in a traditional brokerage account without dealing with crypto exchanges or self-custody. While the advent of spot ETFs has severely diminished this advantage, some legacy capital pools or investment mandates may still favour a corporate equity structure.

3. Implicit Leverage: MicroStrategy's use of debt and preferred equity to fund its purchases provides shareholders with leveraged exposure to Bitcoin's price movements. This structure creates asymmetric upside potential, similar to a call option, which is attractive to bullish investors and traders.  

4. Speculative Fervour: MSTR has become a premier trading vehicle for expressing a high-beta view on the crypto market. Its volatility is immense, with a 30-day historical volatility of ~113% compared to Bitcoin's ~55%. This attracts speculative capital seeking amplified returns, which helps to sustain the premium.  

It is crucial to recognise that this premium is not stable. Historically, the average premium has been around 1.3x NAV (or a 30% premium). The current level is exceptionally high, having been above 2.0x NAV on only 6% of trading days since 2021. This suggests the current valuation is in rare territory and may be susceptible to mean reversion.  

Prediction: The Weight of Bitcoin and the Future of the Premium

This analysis leads directly to an answer for the user's question regarding the weight of Bitcoin holdings in MSTR's valuation. The value of the Bitcoin holdings is foundational but ultimately insufficient to determine the stock's price. The stock's market value is best expressed as a function: Market Price = (NAV per Share) * (Premium Multiplier). Therefore, while the Bitcoin holdings anchor the NAV, it is the volatile and speculative premium multiplier that dictates the stock's day-to-day performance and carries the most significant risk for shareholders.

My Thinking: The long-term trajectory for MicroStrategy's stock will be defined by premium compression. The primary justification for its premium—its status as a unique vehicle for accessing Bitcoin—has been fundamentally undermined by the launch and success of numerous low-cost spot Bitcoin ETFs. As these ETFs become more integrated into the financial system, with robust options markets and institutional adoption, the rationale for paying a premium of over 80% for MSTR's leveraged exposure will continue to erode.  

This does not mean MSTR will trade at NAV, as its use of leverage will likely always justify some premium over a simple spot ETF. However, a reversion toward the historical average premium is highly probable. Consequently, MSTR's stock can underperform Bitcoin or even decline in a flat or moderately rising Bitcoin price environment, should this premium compression occur. The investment is therefore not just a bet on the price of Bitcoin, but a more complex and risky bet on the sustainability of a historically elevated and fragile market premium.

Conclusion: A Bet on Sentiment

The recent slide in MSTR's stock may be a warning shot from a market that is beginning to question the sustainability of its valuation. The upcoming earnings report will provide a fresh data point for the NAV, but it cannot, by itself, justify the premium. The stock's future performance hinges on pure market sentiment and the continued willingness of investors to pay more for MSTR than the sum of its parts.

A positive market reaction could stabilise the stock, but the long-term risk of premium compression remains immense. MSTR could underperform or even decline in a flat or rising Bitcoin environment if this premium reverts toward its historical average. The earnings report will be a turning point, not because of the financial results themselves, but because it forces the market to once again weigh the logic of its high-stakes, high-premium bet on Bitcoin.

@TigerWire