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MicroStrategy seems heavily leveraged, which creates extra risk on the downside. If the underlying asset doubles, MicroStrategy roughly doubles. But if the und
by pavlov 2y ago
MicroStrategy seems heavily leveraged, which creates extra risk on the downside.
If the underlying asset doubles, MicroStrategy roughly doubles. But if the underlying asset goes down by 50%, MicroStrategy is stuck paying interest on loans it took to buy an asset that’s now heavily underwater. It can suffer much worse than 50% in that scenario.
- jstanley 2y agoWhat kind of leverage creates risk on the downside without benefit on the upside?
- pavlov 2y agoMicroStrategy’s stock price seems to roughly parallel the price of Bitcoin during this bull market. They are not a simple leveraged Bitcoin fund, but something more complicated where the founder’s personality plays a big role. So I guess the market doesn’t quite know how to value this admittedly unique approach, and it defaults to just following Bitcoin on the upside. Who knows what happens if there’s a crash.
- 627467 2y ago> something more complicated where the founder's personality plays a big role Not to pretend that other leveraged funds founder's are equally known as saylor, but how do all other funds differentiate themselves? Is it the same to through money at one vs another?
- pavlov 2y agoMicroStrategy is publicly listed, which is kind of special. I don’t think there’s a lot of celebrity investor hedge funds that are public. Bill Ackman’s Pershing Square is listed in London and trades at a substantial discount to net asset value (something like 30%). Maybe that’s an indication that markets find it hard to value these vehicles.
- Uw7yTcf36gTc 2y agoThe loans are 0% interest.
- latchkey 2y ago> MicroStrategy seems heavily leveraged "seems"! https://www.youtube.com/watch?v=R87vco0jHvo https://www.youtube.com/watch?v=R87vco0jHvo