Being that MicroStrategy is pioneering a new corporate treasury strategy based on the idea of Bitcoin and have subsequently coined themselves as a Bitcoin Treasury Company, it begs the question how do you evaluate the performance of a company like MicroStrategy?

I like to start with the premise that all public companies are based upon. It is the goal of a public company to increase shareholder value. Most companies are traditionally valued based off their earnings or future projected earnings and are typically expressed through metrics like EPS (earnings per share) and PE (price to earnings) ratios. The idea is that as in investor you want to have more value represented by you shares meaning you want more earnings per share.

MicroStrategy is unique as their strategy is not necessarily focused on increasing their earnings, but rather its goal is to issue debt/shares to increase their Bitcoin holdings, and more specifically they are looking to increase their Bitcoin holdings on a per share basis.

Being that they are a corporate company with a profitable software business, have an incredibly liquid and volatile stock, and have a committed shareholder base that understands their strategy, they can issue convertible debt and new shares cheaply and easily to buy Bitcoin. This is an ability that most individuals and investors do not have on their own and is why I view MicroStrategy as a tool to maximize Bitcoin exposure.

The basic premise of their strategy and what you are buying into is that Bitcoin is a revolutionary technology that will continue to grow in adoption and will be worth significantly more in the future than it is today, meaning that it makes sense to acquire as much Bitcoin while the price of it is relatively low compared to future projections as the more Bitcoin they own means the company will be worth more in the future.

Since their strategy and their goal it to buy as much Bitcoin as they can, it makes sense to value them accordingly. Most public companies are valued based off their earnings and more specifically earnings on a per share basis, so being that MicroStrategy’s whole game plan is centered around acquiring Bitcoin, it makes sense to value them based off the amount of Bitcoin they have and how much Bitcoin there is per share.

You can think of BTC/share similar to Book Value/Share (this metric measures the net asset value of a company on a per share basis), but in this case we are looking specifically at Bitcoin, and the metric used to evaluate how well they are doing at increasing this number is called BTC Yield (change in BTC/share)

Thinking of it from a shareholder’s perspective, I believe in the idea that Bitcoin is a revolutionary technology and think it will be worth more in the future, MicroStrategy could also earn a return on their holdings in the future, and because of this I would rather have more Bitcoin associated with my position further emphasizing why one should focus on BTC/share.

Just a quick disclaimer here, owning MicroStrategy stock does not give you any control or allow you to hold any of their Bitcoin, you cannot convert your shares directly to Bitcoin, but instead I view MicroStrategy as a tool to maximize your Bitcoin exposure. The opportunity for BTC Yield gives you the ability to passively increase the amount of Bitcoin associated with your position while you simply hold MSTR. Because of this your position will benefit both from the appreciation in Bitcoin’s price as well as the increase in BTC/share. How I like to think about it is when investing in MicroStrategy you sacrifice holding the Bitcoin yourself for the opportunity to outperform Bitcoin.