Kerrisdale Capital Takes Some Air Out Of MicroStrategy
Shares of MicroStrategy (MSTR), the enterprise software company that became a bitcoin hoarder, tanked 11.18% yesterday after Kerrisdale Capital shared the thread below on X.
No fundamental reason for this level of premium exists. $MSTR doesn’t provide unique access to bitcoin. Buying BTC in the equity markets is easy and cheap through an ever-growing number of low fee ETPs and ETFs like $IBIT and $FBTC. (2/6)
— Kerrisdale Capital (TradFi) (@KerrisdaleCap) March 28, 2024
$MSTR bulls tout the lack of fees vs other BTC investment vehicles but BlackRock’s $IBIT and Fidelity’s $FBTC only charge 0.25%. This modest level of fee avoidance is not worth paying more than twice the price of BTC. (4/6)
— Kerrisdale Capital (TradFi) (@KerrisdaleCap) March 28, 2024
Crazy things happen in crypto, but this nutty $MSTR premium NGMI. Bagholders FOMO’ing into MicroStrategy instead of the new bitcoin ETFs gonna get rekt (6/6)
— Kerrisdale Capital (TradFi) (@KerrisdaleCap) March 28, 2024
Two Weeks Earlier, A Slightly Different Approach
We had a similar idea to Kerrisdale Capital a couple of weeks ago, except rather than betting on a convergence between MicroStrategy and bitcoin, our bet was on a convergence between MicroStrategy and a bitcoin miner that had underperformed bitcoin year-to-date:
Betting On A Convergence
Bitcoin is up about 65% year-to-date, but there’s an interesting divergence between two Bitcoin-related stocks, both of which have appeared among Portfolio Armor’s top ten names in the past: one up more than 150% year-to-date, and the other is down more than 15% year-to-date.
I am using options to bet on the stock that’s down year-to-date to rise and the one that’s up more than 150% year-to-date to drop over the next few months.
We got a fill on our bullish options bet on the bitcoin miner right away, and that part of the convergence has started to happen: that miner is up about 28% since.
Betting against MicroStrategy was a bit more of a challenge. Put options on it were extremely expensive, so we took the late Charlie Munger's advice ("Invert, always invert!") and opened an order to sell a call spread on it. Even then, we weren't getting a fill at the price we wanted. But we finally got a fill on Thursday, after Kerrisdale Capital's X thread rattled the market a bit. You can read about both trades by clicking the image below.
You may be able to still get decent entries on both on Monday.
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