Odd Lots Lots More with Matt Levine on MicroStrategy's Infinite Money Machine
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Jan 31, 2025 In this lively discussion, Matt Levine, a Bloomberg Opinion columnist, shares insights into MicroStrategy's bold financial maneuvers, likening its operations to a 'perpetual motion machine.' He explores how the company's strategic Bitcoin investments and innovative use of convertible bonds have successfully boosted its market value. Levine also highlights the risks of volatility in this crypto-driven strategy and touches on the rise of custom indexing as a new investment choice. Expect humor alongside savvy financial analysis!
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MicroStrategy's Perpetual Motion Machine
- MicroStrategy's stock trades at a premium to its Bitcoin holdings, creating an unusual arbitrage opportunity.
- The company continues to exploit this by selling stock and buying Bitcoin, further increasing its value.
MicroStrategy's Leverage
- MicroStrategy's ability to get non-margin callable leverage is a key asset, though their pricing doesn't reflect typical leverage.
- They use convertible bonds, allowing investors to gain Bitcoin exposure with downside protection.
MicroStrategy's Convertible Bonds
- MicroStrategy issued convertible bonds at 0% with a 55% conversion premium, despite the stock's high valuation.
- Investors continue to purchase these bonds, highlighting their interest in MicroStrategy.