Another analyst wants to 'step off' MicroStrategy's 'rollercoaster entirely'

Nikolaos Sismanis, a Seeking Alpha analyst who's big on Bitcoin, has now come up with a strategy for Strategy's stock (MSTR).

Strategy (previously known as microStrategy) is Wall Street's largest corporate Bitcoin holder. 

Sismanis' recent research presents the intelligence and creativity while advising investors on the financial possibilities of Strategy's playbook.

Instead of only listing units of stock for sale, Strategy has established a set of preferred shares - STRK, STRF, STRD, and STRC - which are customized for different types of investors. 

STRK provides an 8% yield and can convert into stock, offering the yield and upside of Bitcoin ownership.

STRF is the safest alternative, yielding 10% and fully backed by Bitcoin. In contrast, STRD yields 10%, but it lacks full Bitcoin backing, making it less suitable for chasing yield. 

STRC allows for 9% monthly payments, basically to compete with money markets.

Sismanis view it much like being in a customized bond market, allowing Strategy to raise capital at lower cost levels and still allow Strategy to continue to buy more Bitcoin. 

Sismanis says: 

"I have to admit that no precedent exists at this scale, and that scares me. And even if the math behind this technically works, you have the execution risk of it all to think about."

Investor backlash

Most of Strategy's money inflow still comes from the issuance of new common stock.

Earlier, Strategy pledged not to issue new stock when its share price was trading significantly above its Bitcoin position value (mNAV), and also pledged to take a protective position for current share-owners. This offended many analysts and investors.

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For instance, on August 17, Josh Mandell exited his position on MSTR entirely. Jim Chanos, an investor, has consistently argued that buying Bitcoin is preferable to investing in MSTR, given the company's high market premium relative to its Bitcoin holdings.

Supporters push back

However, many supporters, including Sismanis, argue that it gives Strategy the freedom to buy Bitcoin during dips, which still increases the amount of Bitcoin per share as long as the stock trades above its book value. Sismanis says flexibility is better than sticking to strict rules.

Regardless, the risks are not lost on him. If the stock's premium (mNAV) drops below 1.0 — the shares are worth less than the Bitcoin they represent —Strategy would either need to sell Bitcoin or issue shares at a loss. 

Related: What are tokenized stocks? Explained

This would violate its 'only accumulate' position, and questions would arise regarding why investors would not simply buy Bitcoin directly, something Chanos has repeatedly raised.

Sismanis says, "After watching all of this unfold, I've decided to step off the MSTR equity rollercoaster entirely."

Due to this risk, Sismanis has sold his MSTR shares. Rather, he plans to sell options on the stock due to its volatility and high premiums. For example, he sold a September 2026 put at $310 and received $61.80 per share. 

Even if assigned, he says he would effectively buy in at about $248, which he sees as a safer bet.

He says, “Volatility is still high, even well below its previous highs, and with premiums this fat, the margin of safety is greater, all while the potential returns can be juicy." 

However, he is clear in his stance when he says, “So, I am still long, but from a different angle. 

At press time, MSTR was trading at $335.65 down 1.75% in the last 24 hours.

FAQs

Q: What is MicroStrategy (Strategy) most famous for?

A: MicroStrategy, which has recently changed its name to Strategy, is best known for being the biggest corporate holder of Bitcoin on Wall Street. The company started out making business-intelligence software, but under Executive Chairman Michael Saylor, it has changed its focus to using its balance sheet to buy Bitcoin.

Q: How does Strategy buy so much Bitcoin?

A: Strategy buys Bitcoin in a number of ways, including:

• Issuing new common stock means selling shares directly on the market. 
• Offering preferred shares like STRK, STRF, STRD, and STRC, which are made to be interesting to different types of investors.
• Debt financing, which includes convertible bonds.

Q: Some investors would rather buy Bitcoin directly than MSTR stock. Why?

A: When you look at the mNAV value of the Bitcoin that MSTR holds, its shares often trade at a higher price. Critics say this makes the stock too expensive and that it's easier to just buy Bitcoin directly.