MicroStrategic shares plunged on Tuesday, after Citibank reportedly downgraded the business intelligence firm due to its disproportionate focus on Bitcoin.
Citi analyst Tyler Radke released a sell rating on MSTR shortly after the company announced it was raising more money to buy bitcoin (BTC).
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Radek says CEO Michael Saylor's disproportionate focus on Bitcoin exposes investors to significant risks, especially after the (excessive) rally since September.
he wrote: “MSTR's investment in Bitcoin has generated a return of $ 250 million (or $ 26 a share or + 20% equity) since August 20. Impressive though it is, it pales in comparison to the 172% return in stocks. And at the current share price, our analysis suggests that the market is setting the price in much more optimistic valuation scenarios for core business and Bitcoin.
MicroStrategy's share price has risen since August when the company first announced a Bitcoin deal. MSTR is seen by many investors as an indirect investment in Bitcoin, given the company's massive cryptocurrency reserves.
Last Monday, MicroStrategy revealed plans to allocate another $ 400 million to its Bitcoin vaults. To do so, the company plans to issue a $ 400 million convertible bond. According to the Coin Telegraph, the $ 400 million will increase the company's Bitcoin reserves by more than 20,800 Bitcoins.
MicroStrategic is by far the largest owner of Bitcoin. It currently has 40,824 Bitcoins on its books, with a combined value of $ 769.2 million.
Institutional and corporate investors are turning to Bitcoin as a hedge against inflation and dollar instability. Saylor likened his company's cash reserves to a melting ice cube as the purchasing power of the US dollar continues to decline. He believes asset inflation will grow to more than 20% annually.
