Why did MicroStrategy’s stock rise in September? Earnings begin and end with Bitcoin, but there is more to the story.
Actions of Microstrategy (MSTR 7.12%) gained 27.3% in September, according to data from S&P Global Market Intelligence. The business intelligence software company, known for reinvesting its cash reserves in Bitcoingenerally tend to rise with leading crypto. It also accelerated in mid-September, when the company said it would soon borrow another $700 million to refinance old debt and buy even more Bitcoin. And that’s not all – MicroStrategy shares rose again when the new debt was extended to $1.01 billion a few days later.
MicroStrategy’s continued Bitcoin purchases boosted the stock
Bitcoin prices rose 10.6% in September, boosted by a strengthening American economy. Crypto investors also expect the digital currency to catch up soon enough, as a result of Bitcoin halving its mining rewards in April. The end of 2024 or the first half of 2025 would be a reasonable starting point for the fourth increase in prices based on the half, based on the market data from the first three halves.
With 252,220 Bitcoins under its belt as of September 19, MicroStrategy’s digital currency holdings are worth about $15.6 billion today. It is the largest corporate Bitcoin position in the world according to Bitcoin Treasuries. It is not surprising to see the shares of this company following the market trends of the Bitcoin price chart.
The massive Bitcoin position includes 7,420 new coins, bought with the portion of MicroStrategy’s fresh debt that wasn’t used to pay off an older batch of senior debt notes. Investors loved this upsized refinancing and the addition of more Bitcoin, judging by the soaring stock of MicroStrategy. Share prices rose by 18.7% that week.
Does MicroStrategy’s software business even matter anymore?
The stock of MicroStrategy was a fairly accurate proxy for Bitcoin investments from 2020 to the beginning of 2024. The software company separated from the Bitcoin price trends in February of this year, as the investors embrace his all-in approach to the Bitcoin opportunity. The price increase in March involved another debt-based purchase of Bitcoin, underscoring MicroStrategy’s commitment to its Bitcoin strategy.
I mean, it’s all about digital Benjamins these days. The software business is profitable and service subscription sales increased 21% year over year in the second quarter. But Bitcoin is the power that moves the needle for MicroStrategy investors anyway.
For example, MicroStrategy introduced a slew of new features to its ONE software suite on Oct. 1, boosting the package’s generative artificial intelligence (AI) powers and data analytics capabilities. Market makers yawned and dropped MicroStrategy’s stock price 5% lower that day.
So MicroStrategy may be the stock for you if you expect Bitcoin to continue to rise and want to invest in that trend via a standard stock. Or maybe you expect the company to fund massive long-term improvements to its software business from its growing Bitcoin reserves. However, MicroStrategy has become a fairly straightforward bet on Bitcoin. Cryptocurrency bears should look elsewhere. The September market action only reinforced that argument again.
Anders Bylund has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.