Citi downgrades MicroStrategy stock after bold bet on Bitcoin

MicroStrategy was downgraded to „sell“ from „neutral“ on Tuesday.

MicroStrategy (MSTR) shares fell on Tuesday after Citibank allegedly downgraded the business intelligence firm for its „disproportionate“ approach to Bitcoin (BTC).

Citi analyst Tyler Radke issued a „sell“ rating on MSTR shortly after the company announced it was raising more money to buy Bitcoin. Radke says that CEO Michael Saylor’s „disproportionate focus on bitcoin“ puts investors Bitcoin Code at considerable risk, especially after a „too-extended“ rally since September.

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He wrote:

„MSTR’s investment in bitcoins has returned $250 million (or a value of $26 per share or +20% in shares) since August 2020. While impressive, it pales in comparison to the return of 172% of shares. At the current share price, our analysis suggests that the market is trading in much more optimistic valuation scenarios for the core business and Bitcoin.

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MicroStrategy’s share price has risen since August, when the company first announced its Bitcoin game. Many investors see MSTR as an indirect investment in Bitcoin given the company’s vast digital currency reserves.

On Monday, MicroStrategy revealed plans to allocate another $400 million to its Bitcoin treasures. To do so, the company plans to issue $400 million in senior convertible notes. As reported by Cointelegraph, $400 million would increase the company’s Bitcoin reserves by more than 20,800 BTC.

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MicroStrategy is by far the largest corporate owner of Bitcoin. It currently has 40,824 BTCs on its books with a combined value of USD 2.756 billion.

Institutional investors and corporations are turning to Bitcoin as a hedge against inflation and dollar instability. Saylor has likened his company’s cash reserves to a „melting ice bucket“ as the purchasing power of the US dollar continues to plummet. He believes that asset inflation will grow at over 20% per year.

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