In a notable move unveiled on Thursday, Kerrisdale Capital announced its short position on shares of Microstrategy, Inc. (NASDAQ:MSTR), despite concurrently holding a long position on Bitcoin.
The firm disclosed its stance, citing concerns over the disproportionate premium at which MicroStrategy’s shares are currently trading compared to the digital asset, Bitcoin, which forms the foundation of its valuation.
Kerrisdale Capital’s commentary underscores the remarkable surge in MicroStrategy’s stock price following the recent upward trajectory of Bitcoin’s value. However, the firm contends that the substantial premium, exceeding two and a half times the spot price of Bitcoin, lacks justification. It underscores that while MicroStrategy was once perceived as a unique avenue for Bitcoin investment, the evolving cryptocurrency landscape, characterized by enhanced accessibility through brokerages, crypto exchanges, and low-cost investment products, has eroded its comparative appeal.
Central to Kerrisdale Capital’s analysis is the anticipation of a contraction in the inflated premium on MicroStrategy’s shares, presenting what it terms as a “compelling opportunity” for a paired trade strategy.
The thesis put forth by Kerrisdale Capital revolves around the distortion observed in the relationship between Bitcoin and MicroStrategy. The firm forecasts a potential 50% return should the premium relative to net asset value revert to historically consistent averages.
