MicroStrategy Doubles Down on Bitcoin, Unveils "21/21" Plan

MicroStrategy Doubles Down on Bitcoin, Unveils "21/21" PlanMicroStrategy, the company that has gained notoriety for its "all-in" approach to Bitcoin investment, has announced an ambitious "21/21 Plan." This plan outlines their intention to raise $42 billion through equity and debt over the next three years, further boosting their Bitcoin holdings

MicroStrategy Doubles Down on Bitcoin, Unveils "21/21" Plan

MicroStrategy, the company that has gained notoriety for its "all-in" approach to Bitcoin investment, has announced an ambitious "21/21 Plan." This plan outlines their intention to raise $42 billion through equity and debt over the next three years, further boosting their Bitcoin holdings. The news signifies that MicroStrategy will continue its "Bitcoin buying spree," reinforcing its identity as a "Bitcoin proxy."

On October 30th, MicroStrategy revealed the details of the "21/21 Plan" alongside their third-quarter earnings report. The plan entails raising $21 billion through equity financing and another $21 billion through debt financing. The $21 billion equity financing has already garnered over $3.5 billion, exceeding the scale of Tesla's $10 billion equity raise in 2020. MicroStrategy opts for a "market offering" approach, engaging banks to sell shares, allowing them to raise the entire amount without submitting additional regulatory documents.

Regarding the significance of the number "21" in the "21/21 Plan," MicroStrategy CEO Phong Le explained that this number holds "special meaning" in the Bitcoin world, as the maximum supply of Bitcoin will forever remain at 21 million. He referred to "21" as a "magical number," drawing a parallel to the answer "42" calculated by the supercomputer in the sci-fi series "The Hitchhiker's Guide to the Galaxy" as the answer to life, the universe, and everything.

Since the pandemic, MicroStrategy has consistently used Bitcoin as a hedge against inflation, making continuous purchases over several years, becoming the largest Bitcoin holder among publicly listed companies in the US. As of September, MicroStrategy held over 250,000 Bitcoin, valued at over $17 billion as of October 31st. This has solidified MicroStrategy's status as a "Bitcoin proxy," with its stock price closely intertwined with Bitcoin's performance.

MicroStrategy's Bitcoin investment strategy initially involved using cash flow for purchases, later transitioning to leverage through tools like convertible notes. This approach has propelled MicroStrategy's stock price to even more significant growth than Bitcoin itself. Over the past year, MicroStrategy shares have surged approximately 475%, exceeding Bitcoin's rise of 105% by more than four times.

To better gauge the value of their Bitcoin holdings, MicroStrategy introduced a unique performance metric in their August conference call: Bitcoin Revenue Yield. This metric calculates the ratio of the company's Bitcoin holdings to its outstanding shares. Management has raised the company's Bitcoin revenue yield target for the next three years from 4%-6% to 6%-10%, reflecting the anticipated impact of the "21/21 Plan."

Analysts on Wall Street have divergent opinions regarding MicroStrategy's future prospects. On one hand, some analysts believe the current stock price is excessively inflated compared to asset value and anticipate no further increase. On the other hand, some analysts suggest that the new accounting standard coming into effect next year will value the company's Bitcoin holdings at market prices, reversing MicroStrategy's losses, making the company stock still "buyable."

BenchmarkIntech analyst Mark Palmer maintains an optimistic outlook for MicroStrategy. He asserts that the latest financing plan eliminates any doubt regarding MicroStrategy's commitment to its Bitcoin acquisition strategy during periods of Bitcoin market growth. Palmer predicts that if MicroStrategy follows through with the "21/21 Plan," MSTR stock could reach $300. His model assumes a sustained rise in Bitcoin prices, projecting a value of $175,000 by the end of 2025.

MicroStrategy's "21/21 Plan" demonstrates its unwavering belief in Bitcoin, igniting speculation among investors about the future direction of Bitcoin prices. MicroStrategy's "Bitcoin proxy" identity will further solidify as it continues its Bitcoin investment spree, with its future stock performance intimately connected to Bitcoin's price trajectory.