MicroStrategy Falls 9% as Kerrisdale Capital Shorts Stock

Shares of MicroStrategy plunged 9.07% to $1,735.74 after Kerrisdale Capital announced a short position in MSTR shares and a bullish stance on Bitcoin.

Shares of MicroStrategy (MSTR) have dropped 9.07% to $1,735.74, possibly in response to investment asset management company Kerrisdale Capital’s short position in the company’s stock.

Kerrisdale Capital said on Thursday that it would short-sell its MSTR shares and place a long bet on Bitcoin (BTC), the largest cryptocurrency by market capitalization.

The short seller took note of the recent increase in MSTR share price, which coincided with a rise in the cost of Bitcoin. This “is often the case with crypto. Things have gotten carried away,” the company noted.The company thinks MSTR won’t be any different.

Over $177,000 is currently the implied price of Bitcoin in MSTR shares, which is more than 2.5 times the cryptocurrency’s spot price. None of the arguments put up for why MSTR is attractive enough to justify spending more than twice as much for the same currency, according to Kerrisdale Capital.

According to a Kerrisdale Capital analysis, there was never a time when MSTR shares offered an exceptional means of obtaining Bitcoin.

Brokerages, cryptocurrency exchanges, and more recently, fee-based exchange-traded products (ETPs) and exchange-traded funds (ETFs) such as Fidelity’s FBTC and BlackRock’s IBIT are accessible places to buy Bitcoin. 97% of MicroStrategy’s current valuation comprises Bitcoin, particularly following its most recent buy that increased its ownership of the flagship cryptocurrency to 214,246 units.

MicroStrategy is worth $28 billion on the market, but its holdings in Bitcoin are only worth $15.2 billion.

Short Sellers Position on MicroStrategy Stock Shifts

Remarkably, MicroStrategy is not the only stock having short interest, nor is Kerrisdale Capital the only investor selling short shares of the company.

The cryptocurrency stock market has a $10.7 billion total short interest, with 84% of the negative bets led by MicroStrategy and Coinbase (COIN).

Given that the shares of MicroStrategy had increased by 155% year to date, the company’s recent favorable movement suggested that it would overcome its short sellers.

The company’s prospects at the time threatened traders’ bets against MSTR, as they feared suffering significant paper losses during the spike in the stock price.

Even Blue Chip Daily Trend Report’s Chief Technical Strategist, Larry Tentarelli, thought that shorting MicroStrategy was a difficult choice. Still, it’s not as hard as Tentarelli had claimed, given the market’s status.