After gains of 346% in 2023 and about 360% in 2024 for a total just under 2,000% for two years, it is worthwhile to consider the premium MicroStrategy’s shares are selling for versus its bitcoin holdings.

MicroStrategy announced on August 11, 2020, its first bitcoin purchase where it bought 21,454 bitcoins for $250 million or an average of $11,653. Over the past four plus years it has bought a total of 444,262 bitcoins for about $27.7 billion or $62,257 each.

While the last five purchases of bitcoin are under-water, the company has made about $14.4 billion in profit or approximately $59 or $51 per share, respectively, depending on which share count is used, 245 million basic or 281 million fully diluted. The cost basis per MicroStrategy share is about $172 or $150, again based on basic or fully diluted share count.

MicroStrategy’s market cap has exploded

On December 31, 2017, MicroStrategy’s market cap was $152 million with 11.5 million fully diluted shares and two years later on December 31, 2019, about eight months before the company bought its first bitcoin, it was $147 million based on 10.3 million fully diluted shares.

With a share price of $290 on Tuesday, December 31, its market cap was just over $71 billion based on 245 million basic shares and about $81.5 billion assuming all its diluted shares are converted.

The company’s core software business has seen slightly declining revenue

Over the past eight years MicroStrategy’s revenue has declined from $504 million to an estimated $469 million in 2024 or 6.9% lower.

• 2017: $504 million
• 2018: $498 million
• 2019: $486 million (pre-Covid)
• 2020: $481 million
• 2021: $511 million
• 2022: $499 million
• 2023: $496 million
• 2024: $469 million estimated
• 2025: $480 million estimated

Its operating cash flow has decreased significantly the past three years and turned negative in the first nine months this year.

• 2017: Positive $78.3 million
• 2018: Positive $10.6 million
• 2019: Positive $60.9 million
• 2020: Positive $53.6 million
• 2021: Positive $93.8 million
• 2022: Positive $3.2 million
• 2023: Positive $12.7 million
• 3 Qtrs. 2023: Positive $11.5 million
• 3 Qtrs. 2024: Negative $35.7 million

Free cash flows are operating cash flows minus capital expenditures. The company has seen the same trend as operating cash flow as capital expenditures have been $4 million or less the past five years.

• 2017: Positive $74.3 million
• 2018: Positive $3.8 million
• 2019: Positive $50.7 million
• 2020: Positive $50.0 million
• 2021: Positive $91.1 million
• 2022: Positive $0.7 million
• 2023: Positive $9.8 million
• 3 Qtrs. 2023: Positive $8.9 million
• 3 Qtrs. 2024: Negative $38.4 million

MicroStrategy’s market cap is about twice the value of its bitcoin holdings

With MicroStrategy generating a small amount of cash each year and a market cap of $71 billion or higher, it appears MicroStrategy’s bitcoin holdings are responsible for most of the company’s value.

From August 2020, when the company first started buying bitcoins, until around September this year, there was a fairly constant relationship between MicroStrategy’s stock price and bitcoin’s. However, the chart below shows starting in September MicroStrategy’s shares increased at a much higher rate than bitcoin’s. The difference peaked in late November but there is still a large discrepancy.

On New Year’s Eve bitcoin is trading around $94,670 per Forbes Digital Prices. Since the company owns 444,262 bitcoins, the value of them is approximately $42.06 billion or $171 per share using basic shares or $149 using fully diluted shares.

This means MicroStrategy’s market cap of $71 billion is 1.7 times the value of its bitcoin holdings using the basic share count. When using the diluted share count it is 1.9 times.

While the relationship between MicroStrategy’s stock price and its bitcoin holdings may not reach parity, if an investor is looking to own bitcoin it is probably better to own bitcoins itself versus owning MicroStrategy shares.