Short-selling institution Kerrisdale Capital released a research report on Thursday, criticizing the overvaluation of the stock price of MicroStrategy, the dominant holder of Bitcoin among US listed companies, and announced that it is short-selling MicroStrategy stock. As soon as the report came out, MicroStrategy’s stock price plummeted by over 11% on Thursday.
Kerrisdale Capital stated in the research report that while the institution is going long on Bitcoin, it is shorting the stock of MicroStrategy, which is the dominant holder of Bitcoin among listed companies. The report claims that MicroStrategy’s stock price is unreasonably inflated compared to the value of Bitcoin that drives it, with the implied price of Bitcoin in MicroStrategy’s stock exceeding $177,000, which is 2.5 times the current price of Bitcoin. Kerrisdale Capital argues that there is no reason to justify paying more than twice the price for the same token.
Kerrisdale Capital believes that with the emergence of Bitcoin spot ETFs, MicroStrategy’s stock is no longer the primary way to expose oneself to Bitcoin. Since the approval of Bitcoin spot ETFs for listing in January this year, the total trading volume has far exceeded $150 billion, attracting a net inflow of $18.3 billion. Kerrisdale Capital disclosed that it holds long positions in BlackRock and Fidelity’s Bitcoin spot ETFs.
MicroStrategy continues to implement its strategy of accumulating Bitcoin. The company currently holds 214,246 Bitcoins, accounting for 1% of the total Bitcoin supply. The cost of holding is $7.53 billion, and the current value is $15.08 billion, resulting in an unrealized gain of approximately $7.55 billion.
After the release of the report, MicroStrategy’s stock price plummeted by 273.64 dollars or 14.3% to $1,645.52 during Thursday’s trading session. It closed down by $214.60 or 11.18% at $1,704.56. However, despite the sharp decline on Thursday, MicroStrategy’s stock price has still risen by 169.87% so far this year.
Kerrisdale is not the only investor shorting MicroStrategy’s stock. According to a previous report by S3 Partners, the total short position of cryptocurrency-related stocks amounts to $10.7 billion, with MicroStrategy and Coinbase accounting for 84% of these short positions.