On December 8, 2020, Citigroup, one of the largest banks in the world, downgraded the Micro-Strategy Stake (MSTR) stake rating. Since then, MSTR shares rose 113.27% from $ 289.45 to $ 617.31 as the price of Bitcoin (BTC) rose.

During the same period, Citigroup shares were down 0.63%, from $ 58.36 to $ 57.99.

MicroStrategy shares against BTC and Nasdaq. Source: Environmental Metrics
Why did MicroStrategy perform well despite the downgrade?
MicroStrategy invests its holdings in Bitcoin, making BTC Treasury reserve capital. It is currently the largest listed company with more than 70,000 Bitcoins, valued at around $ 2.4 billion at current prices.

Moreover, on December 9, 2020, MicroStrategy announced that it has raised a capital of $ 550 million in convertible bonds.

In an official statement, MicroStrategy explicitly stated that it intends to invest in bitcoins with the proceeds of the bond. It is also the ad that asked Citi to downgrade MicroStrategy. The statement says:

MicroStrategy aims to invest the net income from bond sales in bitcoin in line with Treasury policy before setting working capital requirements and other general corporate objectives.
At the time, Citigroup analyst Tyler Radke published a sales ranking. He admitted that the return on MicroStrategy’s bitcoin investment was “impressive,” but said the market had overestimated the company’s core business. he wrote:

MSTR’s investment in Bitcoin since August 20 has generated a profit of $ 250 million (or $ 26 a share, or + 20% on shares). Although impressive, it pales in comparison to its EPS of 172%. At the current share price, our analysis shows that the market prices are in more optimistic valuation scenarios for the mainstream business and Bitcoin. ”
Since December 2020, Bitcoin’s price has skyrocketed. While the doubts about MicroStrategy’s core business may have some basis, BTC saw 100% growth in the last month of the year.

In December alone, Bitcoin rose from $ 18,319 to more than $ 42,000 on Binance, outpacing most assets in both the stock and cryptocurrency markets.

What then?
MicroStrategy remains a significant business intelligence company with billions of dollars in sales and a strong core business.

But as long as the bitcoin price continues to rise in the near future, this is likely to have a positive effect on MSTR’s stock price.

Michael Sellor, CEO of MicroStrategy is still pretty confident in the company’s position on Bitcoin and often buys when prices drop. In the accounts for the fourth quarter of 2020, Sailor wrote:

“In the future, we will continue planning to store bitcoins and invest additional surplus funds in bitcoin. Additionally, we will explore different ways to obtain more bitcoins as part of our overall business strategy.”

Source: CoinTelegraph