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It's essentially a public holding company for bitcoin now. So using P/E isn't a relevant metric, try P/B, or use P/E after subtracting the bitcoin value from ma
by dtwest 6y ago
It's essentially a public holding company for bitcoin now. So using P/E isn't a relevant metric, try P/B, or use P/E after subtracting the bitcoin value from market cap. Your valuation methodology is as broken as the world supposedly is.
- christiansakai 6y agoPlease explain to me in plain English. I am dumb.
- dtwest 6y agoA company that owns $100 of cash and does nothing, should be worth $100. It earns $0, but is still worth $100. Therefore, its P/E would be 100/0 = infinity. MSTR is becoming sort of like that. It very well could still be overvalued, but people aren't buying it for its earnings, they are buying it for the assets it holds (bitcoin).
- christiansakai 6y agoCan I create an infinite energy money machine by doing this: BTC is held by MSTR, MSTR is held by ABC, ABC is held by FGE, FGE is held by XYZ? Eventually all companies hold it, and SP500 will be BTCPrice * 500. Everyone is rich. It's just a matter of time before it goes to the whole market. Everyone is rich.
- dtwest 6y agoNope can't do that. MSTR might trade at a premium to its BTC holdings but only because at the moment it allows people to buy BTC through more traditional investment accounts. Your hypothetical ABC wouldn't have any advantage over MSTR so it would trade at parity. I'm really not trying to be pro or anti BTC/MSTR here, just explaining whats going on. It's valid to think it's stupid/overvalued, but I'm just pointing out that its P/E ratio isn't the reason. And comparing MSTR's P/E to Apple's doesn't really make sense at face value.
- christiansakai 6y agoMakes sense. Thanks.
- ac29 6y ago> MSTR might trade at a premium to its BTC holdings but only because at the moment it allows people to buy BTC through more traditional investment accounts The grayscale trust is actually trading at a discount to its bitcoin holdings, so thats not much of a reason (today, at least). https://grayscale.co/bitcoin-investment-trust/#market-performance https://grayscale.co/bitcoin-investment-trust/#market-perfor...
- dtwest 6y agoIf you look at your source, it historically almost always trades at a premium. Today is an outlier, probably due to the big sell off recently.