The analytics-software provider MicroStrategy has purchased an additional 29,646 BTC for $650 million. The announcement was made on Monday, December 21 by the company’s CEO, Michael Saylor.
MicroStrategy has purchased an additional 29,646 bitcoins for $650 million at an average price of $21,925 per #bitcoin and now #hodl an aggregate of 70,470 bitcoins purchased for $1.125 billion at an average price of $15,964 per bitcoin.https://t.co/j6wVLXIzoa
— Michael Saylor (@michael_saylor) December 21, 2020
The average price of the latest purchase was $21,925 per bitcoin, including fees and charges.
As of December 21, 2020, MicroStrategy owned approximately 70,470 BTC. The average price per asset was $15,964.
“The company continues to believe that Bitcoin will provide the opportunity for higher returns and preservation of capital over time relative to cash holdings,” said the software provider’s chief financial officer, Fong Li.
According to Yahoo Finance, MicroStrategy Inc.’s shares rose 1.14% after the report of additional investments in the primary cryptocurrency. At the time of writing, the Nasdaq-listed stock was trading at $301.20.
Source: Yahoo Finance.
The current market price is 41% above its fair value, based on forecasts of Yahoo Finance analysts polled. From a fundamental-analysis perspective, shares are considered overvalued if their current market price significantly (typically 15% or more) exceeds their fair value. The latter should take into account all available information and be based on any method (DCF, multiples), or a combination thereof.
According to Bitcoin Treasuries, the value of the cryptocurrency the analytics-software provider has purchased this year is estimated at $1.6 billion. The total expenditure on its purchase amounts to $1.125 billion.
A decline in Bitcoin’s price from the current $22,650 to the average purchase price of $15,964 would contribute to returning the stock’s market price to its fair value above. A [simple_tooltip content=’Unrealized profit (loss) — profit (loss) on assets comprising an investment portfolio, based on comparing current market price of securities with their initial cost’]«paper losses»[/simple_tooltip] for the company and adjustment of this calculated metric. Maintaining Bitcoin at current levels or its further rise will help revise the fair value upward and reduce the degree of overvaluation of MicroStrategy’s shares.
On December 5, Saylor announced the third consecutive investment in Bitcoin. After purchasing 21,454 BTC (about $250 million at the rate at the time of the deal) in August and 16,796 BTC for $175 million in September, the company bought an additional 2,574 BTC for $50 million.
Earlier on December 11, MicroStrategy Inc. announced the raising of $650 million in debt financing to invest in Bitcoin.
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