Short-selling firm Kerrisdale Capital released a research report on Thursday, criticizing the overvaluation of the stock price of the US-listed company MicroStrategy, a dominant holder of Bitcoin. They announced that they are shorting MicroStrategy’s stock. Following the report, MicroStrategy’s stock price plummeted by more than 11% on Thursday.
Kerrisdale Capital stated in the research report that they are long on Bitcoin but short on the stock of MicroStrategy, believing that the stock is an alternative investment to Bitcoin and has an unreasonable premium compared to the value of Bitcoin that drives it.
According to Kerrisdale Capital, the implied price of Bitcoin in MicroStrategy’s stock has exceeded $177,000, which is 2.5 times the current price of Bitcoin. They argue that there is no reasonable justification to pay more than twice the price for the same token.
Kerrisdale Capital also pointed out that with the introduction of Bitcoin spot ETFs, MicroStrategy’s stock is no longer the primary way to gain exposure to Bitcoin. They mentioned that since the approval of Bitcoin spot ETFs in January this year, the total trading volume has exceeded $150 billion, with a net inflow of $18.3 billion.
MicroStrategy continues to execute its corporate strategy of accumulating Bitcoin, currently holding 214,246 Bitcoins, which is 1% of the total Bitcoin supply. The cost of holdings is $7.53 billion, with the current value at $15.08 billion, resulting in an unrealized profit of approximately $7.55 billion.
After the report was released, MicroStrategy’s stock price experienced a sharp decline on Thursday, dropping by 14.3% at one point to $1,645.52 and closing down by 11.18% at $1,704.56. Despite the Thursday drop, the stock price of MicroStrategy has surged by 169.87% year-to-date.
Kerrisdale is not the only investor shorting MicroStrategy’s stock. According to a previous report by S3 Partners, the total short position for cryptocurrency-related stocks amounts to $10.7 billion, with MicroStrategy and Coinbase accounting for 84% of these short positions.