MicroStrategy Inc shares suffered a significant drop after Citron Research, led by Andrew Left, announced their decision to bet against the software company, which has recently shifted its focus to becoming a Bitcoin investment fund. The stock fell by 16% to close at around $397, reversing an earlier gain of nearly 15% during the session. This marked the stock’s worst performance since April 30, despite the ongoing rally in Bitcoin, which had reached a record high.
Under the leadership of Chair Michael Saylor, MicroStrategy has become closely associated with Bitcoin, having acquired billions of dollars’ worth of the cryptocurrency, sometimes leveraging debt to finance these purchases. However, with the introduction of Bitcoin ETFs, investors now have the option to directly invest in such funds rather than using MicroStrategy’s stock as a proxy.
Citron Research noted that with Bitcoin investing now more accessible than ever, MicroStrategy’s trading volume no longer aligns with Bitcoin’s fundamentals. The firm stated that while they maintain a bullish outlook on Bitcoin, they have taken a short position on $MSTR to hedge their bets.
The surge in Bitcoin prices, which surpassed $98,000 on Thursday, has also driven up the value of MicroStrategy shares, which have seen a 500% increase in value this year. Prior to the recent drop, the company briefly held a market capitalization exceeding $100 billion, placing it among the top 100 stocks in the S&P 500. As of Thursday’s close, MicroStrategy’s market value stood at around $89 billion.
This move by Citron Research isn’t the first instance of suggesting a hedge against a bullish Bitcoin position by shorting MicroStrategy. In March, Kerrisdale Capital Management LLC had also advocated for this approach, being long on Bitcoin but short on MicroStrategy shares.
The post by Citron Research follows a period of relative silence since founder Andrew Left faced charges of securities fraud in July. In September, the firm shared information about another prior investment related to private prisons.
In October, Left sought to have the lawsuit filed against him by the US Securities and Exchange Commission dismissed.
(Updates stock movements at market close)
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