Retail Has Been Caught Holding the Bag on the MicroStrategy Trade

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Disclaimer: The analyst who wrote this piece owns shares of MicroStrategy (MSTR).Bitcoin (BTC) development company MicroStrategy (MSTR) has been one of the stocks to watch in 2024. The company is up 416% year-to-date, up as much as 600% at one point last week. However, since the short report from Citron Research came out on Nov. 21, the stock has dropped almost 40%, subsequently burning retail in the process. This drop coincided with bitcoin dropping almost 10% to $90,000 from its all-time high of just shy of $100,000. According to a post on X by the Kobeissi Letter, which is an industry-leading commentary on global markets, on Nov. 20 retail investors bought up to $42 million worth of MicroStrategy common stock. This was the largest daily retail buy on record and was eight times higher than the daily average in October. Last week alone, retail investors bought nearly $100 million worth of shares. On Wednesday alone last week, retail investors bought ~$42 million worth of MicroStrategy stock, $MSTR.This marked the largest daily retail buy on record and was 8 TIMES higher than the daily average seen in October.Retail investors bought nearly $100 MILLION last week. pic.twitter.com/tSnnx3oX4r— The Kobeissi Letter (@KobeissiLetter) November 26, 2024 As a result of this 40% share price drop, the net asset value (NAV) premium on MicroStrategy has now dropped to around 2.09, one of the lowest premium levels since September. The NAV premium can be worked out by how much the company’s market cap, which is trading at $75 billion against its 386,700 bitcoin holdings which are worth $36 billion. This gives MicroStrategy a NAV premium of 2.09 against its bitcoin holdings. Furthermore, to put into perspective how much trading volume has been seen in MicroStrategy as of late. Last week, MicroStrategy saw $136 billion in volume. This was significantly higher than any period of the Gamestop (GME) mania, according to Eric Balchunas, Senior Bloomberg analyst. “Even the most intense week of GameStop Mania couldn’t come close to the week MicroStrategy just had with $136 billion in volume. I also threw Amazon (AMZ) in there as well, it also has never had a week like this either,” according to Balchunas.

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