MicroStrategy Makes Its Case as Alternative to Spot Bitcoin ETFs

• Michael Saylor's MicroStrategy posted weaker-than-expected fourth-quarter earnings on Tuesday, its first report since bitcoin ETFs were approved in the U.S.
• The majority of its conference call presentation focused on bitcoin and how the cryptocurrency creates unique value for investors.
• The company called itself "the world's first bitcoin development company."

MicroStrategy (MSTR), the software firm whose executive chairman is bitcoin maximalist Michael Saylor, reported weaker-than-expected fourth quarter earnings on Tuesday, but the majority of its conference call presentation focused on the world's leading crypto.

Calling itself “the world’s first bitcoin development company,” the firm in presentation slides said it is “committed to the continued development of the bitcoin network through our activities in the financial markets, advocacy and technology innovation."

Founded in 1989, MicroStrategy was solely a software consulting business through mid-2020. That changed after then-CEO Michael Saylor began moving the firm's treasury assets out of cash and into bitcoin. Today, MSTR by far is the largest publicly traded holder of bitcoin with total holdings of 190,000 bitcoin or more than $8 billion.

MicroStrategy's stock, however, has suffered since the launch of the spot bitcoin ETF products, falling 22% year-to-date even as the price of bitcoin is about flat.

Addressing whether those wishing to allocate to bitcoin might be choosing to buy the ETFs rather than MSTR, the company in its earnings presentation attempted to make its case as the superior alternative.

Among the arguments was that investors in MSTR have active control over the capital structure and that the company has the ability to innovate value as opposed to the ETFs, which simply hold the crypto asset. MSTR also pointed out other factors, such as the difference in management fees and MicroStrategy’s ability to generate cash and tap capital markets for attractive debt deals.

“MicroStrategy shares continue to offer investors looking to gain exposure to bitcoin a number of important benefits, in our opinion, relative to spot ETPs,” TD Cowen analyst Lance Vitanza wrote in a note Tuesday. “Even with spot bitcoin ETPs now serving as potential substitutes, a significant premium [on bitcoin] will continue to be justified, we believe.”