Legacy ratings undervalue MicroStrategy's Bitcoin holdings
The guest argued that legacy rating agencies valuing MicroStrategy's Bitcoin holdings at zero creates a massive valuation dislocation and an alpha opportunity for investors.
The argument
S&P currently gives MicroStrategy a B- credit rating by ignoring its multi-billion dollar Bitcoin balance sheet due to legacy accounting and banking standards. If and when global banking standards change to recognize Bitcoin as valid capital, a massive wave of institutional capital is expected to re-rate these issuers.
The thesis, stress-tested
✓ What validates it
- ✓S&P or other rating agencies upgrading MSTR's credit rating based on its Bitcoin holdings
- ✓Changes in Basel committee rules regarding Bitcoin capital requirements for banks
▸ Risks discussed
- ▸Bitcoin price volatility undermining the collateral backing the debt
- ▸Regulatory delays in updating global banking standards for digital assets
Hear it yourself
"And so the way that I understand this product is that it the difference between it being, like, quote, unquote, a Ponzi or blowing up versus being a just a solid financial product is all down to risk management. Is that true? I would say risk management and balance sheet structure. Really, these are these are capital vehicles. These are companies that hold capital, and they're taking on risk with that capital. Now that capital you're taking on risk on the balance sheet capital. Right? It's not, it's not like I'm deploying each one of my individual Bitcoin and going to go get it, you know, go sell a derivative against the underlying Bitcoin."
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