MicroStrategy CEO Responds to Short Seller: $500 Million Daily Profit, 60% Annual Stock Growth Projected for Next 20 Years

MicroStrategy CEO Responds to Short Seller: $500 Million Daily Profit, 60% Annual Stock Growth Projected for Next 20 YearsLast Thursday, prominent short-selling firm Citron Research announced on X (formerly Twitter) that it was shorting MicroStrategy (MSTR), a major holder of Bitcoin. This caused MSTR's stock price to plummet, at one point falling over 21% from its intraday high

MicroStrategy CEO Responds to Short Seller: $500 Million Daily Profit, 60% Annual Stock Growth Projected for Next 20 Years

Last Thursday, prominent short-selling firm Citron Research announced on X (formerly Twitter) that it was shorting MicroStrategy (MSTR), a major holder of Bitcoin. This caused MSTR's stock price to plummet, at one point falling over 21% from its intraday high. In response, MicroStrategy's Executive Chairman, Michael Saylor, appeared on CNBC Friday to forcefully rebut the short seller's claims and confidently predict the company's future.

Saylor countered Citron's argument that MicroStrategy's stock price was unreasonably inflated relative to its Bitcoin holdings, suggesting excessive trading activity. Citron reasoned that if this premium and equity disappeared, MicroStrategy's profit stream would vanish. However, Saylor argued that Citron neglected a crucial aspect of MicroStrategy's profitability: its leveraged Bitcoin investment strategy funded through debt financing.

Saylor detailed MicroStrategy's profit model, likening the company to a power system with Bitcoin as its "reactor." He highlighted two primary profit sources: profiting from Bitcoin price fluctuations through trading, and accumulating more Bitcoin through debt financing and an ATM (at-the-market) issuance mechanism. The ATM mechanism allows the company to gradually sell shares at the prevailing market price, providing flexibility and efficiency, avoiding the potential steep discounts associated with traditional financing, particularly beneficial for a highly volatile stock like MicroStrategy's.

MicroStrategy's high trading volume enables large-scale stock sales. Currently, its market cap commands a 2.8x premium over its Bitcoin holdings, creating an arbitrage opportunity. Saylor emphasized that ATM transactions allow the company to shift the volatility, risk, and performance of fixed-income assets onto common stock, generating returns significantly exceeding borrowing costs and Bitcoin's appreciation. He illustrated this with an example: "If we finance Bitcoin at 6% interest and Bitcoin rises 30%, we actually get an 80% Bitcoin spread (a function of stock premium, conversion premium, and Bitcoin premium)."

Saylor further showcased the company's strong profitability. He noted that MicroStrategy issued $3 billion in convertible debt, and using the 80% Bitcoin spread calculation, this $3 billion investment could generate $125 per share in earnings over 10 years. More strikingly, he revealed: "Two weeks ago, we did a $4.6 billion ATM and traded at a 70% spread, meaning we made $3 billion in Bitcoin in five days, about $12.5 per share. Over 10 years, that would be $33.6 billion, or roughly $150 per share." He unabashedly declared that as long as Bitcoin's price continues to rise, the company will remain profitable.

Saylor boldly predicted MicroStrategy's future trajectory, stating that the company currently makes $500 million daily, making it "the fastest-growing and most profitable company in America." He projected that Bitcoin's price will rise 29% annually over the next 20 years, while MicroStrategy's stock price will increase by 60% annually. It's noteworthy that MicroStrategy's stock price has already surged 516% year-to-date, nearly four times Bitcoin's 132% increase and significantly outperforming even AI leader Nvidia's 195% gain.

Regarding the risk of Bitcoin price declines, Saylor argued that investors buying MicroStrategy stock inherently accept that risk. "If you want 2x returns, you have to take the associated risk." He acknowledged that investing in MicroStrategy inherently involves the volatility of Bitcoin's price.

Saylor's interview demonstrated unwavering confidence in the company's future and the long-term value of Bitcoin. He emphasized that MicroStrategy's profit model doesn't solely rely on Bitcoin price appreciation but leverages sophisticated financial leverage and strategies to skillfully manage risk and reward. He clearly explained how the company uses the ATM mechanism and Bitcoin price volatility to generate substantial profits, and made bold predictions about future profitability and stock price growth, painting a picture of an ambitious and confident enterprise. He attributed the company's success to its belief in the long-term value of Bitcoin and its shrewd financial strategies, effectively countering the short seller's criticisms. This assertive response and optimistic outlook undoubtedly sent a strong signal to the market.