How MicroStrategy’s bull run is crushing short sellers

How MicroStrategy’s bull run is crushing short sellers - Industry News - News

Michael Saylor’s MicroStrategy has been making headlines in the stock market lately, causing significant waves and leaving a substantial dent in the pockets of those who have been betting against it. Known for its strong affinity towards Bitcoin, MicroStrategy has experienced an extraordinary surge in value this year alone, with shares tripling since the beginning of 2021. This meteoric rise comes as Bitcoin reaches new all-time highs, leaving short sellers in a precarious position and caught off guard by the unexpected rally.

The Hefty Consequences of Betting Against MicroStrategy

Those who have wagered on a decline in the fortunes of MicroStrategy are now facing the daunting prospect of paper losses amounting to a staggering $3.3 billion by 2024, as a result of the stock’s impressive 170% climb. This financial turmoil has been in the making for over a year, with total losses exceeding $4.3 billion.

MicroStrategy’s Rollercoaster Ride

The decision to bet against MicroStrategy might have seemed like a shrewd move, particularly considering the company’s bold investment in Bitcoin. However, the numbers paint a different story – one that has proven to be disastrous for short sellers. According to Larry Tentarelli, the potential losses from shorting MicroStrategy are vast. The stock took a tumble of over 20% in a single day in March after the company announced plans to sell convertible notes, which would be used for purchasing more Bitcoin.

MicroStrategy’s audacious strategy has set the stage for a possible financial crisis for short sellers, with the potential for a short squeeze looming on the horizon. In such a scenario, these traders would be forced to buy back shares at inflated prices in order to cover their losses, further fueling the upward trend of the stock price. And this outcome could happen at any moment, especially given MicroStrategy’s substantial available shares for trading, or float, which currently stands above 22%. This is a common trend among stocks with close ties to cryptocurrency.

All In on Bitcoin

Wall Street analysts have taken notice of MicroStrategy’s impressive bull run, adjusting their price targets accordingly in response to the company’s aggressive Bitcoin acquisition strategy. Canaccord Genuity has set an optimistic price target of $1,810, demonstrating a clear shift in sentiment towards the software maker. This newfound confidence is bolstered by MicroStrategy’s continued investment in Bitcoin, with the company recently allocating an additional $822 million to the cryptocurrency at its record high price of over $73,000.

Analysts, such as Lance Vitanza of Cowen, believe that MicroStrategy’s stock presents an intriguing opportunity for those looking to explore Bitcoin without the need for direct investment. The company’s relentless pursuit of Bitcoin, most recently highlighted by its announcement of proposed convertible senior note sales to finance further cryptocurrency acquisitions, solidifies its place as the largest corporate holder of Bitcoin.

MicroStrategy’s substantial Bitcoin holdings now exceed 205,000 coins, valued at over $15 billion, reflecting the company’s unwavering commitment to the cryptocurrency.