MicroStrategy’s (MSTR) stock price increased by over 20% during the first hours of trading on March 4th in the US. It maintained a gain of over 15% by midday. MicroStrategy is known as the largest institutional investor in Bitcoin. After closing the previous trading day at $1,079, MicroStrategy opened at $1,200 on March 4th and reached its intraday high of $1,339.
Bitcoin’s Rise and MicroStrategy’s Strategy
Mechanism Capital co-founder Andrew Kang states that about $3 billion worth of MicroStrategy’s publicly traded shares, nearly 20%, are locked in short positions. Kang commented on the matter as follows:
“I imagine this volatility is mostly aimed at angry investors trying to capture the premium to the net asset value.”
Kang suggests that investors were looking to benefit from the stock’s increased value compared to its net assets, assuming the share price would fall again. He warned that miscalculation could lead to a significant squeeze, similar to what GameStop (GME) experienced in January 2021. On January 29, 2021, GameStop’s share price increased by 1,500% over a two-week period. GME rose above $81 and then fell to $13 just one month later.
Founder and Chairman Michael Saylor announced on February 26th that MicroStrategy purchased 3,000 Bitcoins between February 15-25 at an average price of $51,813, totaling $155 million in investment. This increased the company’s Bitcoin holdings to 193,000 Bitcoins. The company invested at an average price of $31,554 per Bitcoin, totaling $6.1 billion. With Bitcoin’s price recorded at $66,332 on March 4th, MicroStrategy’s Bitcoin assets were valued at $12.8 billion.
Intense Interest in MicroStrategy Shares
Market observers were already optimistic about MicroStrategy. In a market report dated February 27th, investment bank Benchmark suggested that MicroStrategy could be bought with a target price of $990. Benchmark also predicted that the upcoming Bitcoin halving event would boost MicroStrategy’s share price as well.
On February 20th, Saylor claimed that Bitcoin was technically superior to gold, real estate, and the S&P 500, stating that he would buy Bitcoin indefinitely. As of the time of writing, MicroStrategy’s stock was trading at $1,251, indicating a nearly 16% increase in recent times.
