It’s fair to say that Bitcoin is in a strong bull market right now. This year, it has surged from $43,000 to $89,000 – a gain of more than 100% (of course, past performance is not an indicator of future results, and Bitcoin is highly volatile.) Now, UK investors can’t buy Bitcoin exchange-traded funds (ETFs) for their Stocks and Shares ISAs or SIPPs at the moment because they’ve been banned by the Financial Conduct Authority (FCA). But there is a stock that provides exposure to Bitcoin that can be bought for these investment accounts…
A Bitcoin stock?
The stock I’m talking about is MicroStrategy (NASDAQ: MSTR). It’s a US technology company that has been stockpiling Bitcoin in recent years.
At the end of September, the company held 252,220 Bitcoins. At today’s price of $89,000, that stockpile is worth about $22.5bn.
It seems that UK investors are catching on to the fact that MicroStrategy is a play on Bitcoin (and can be held in tax-efficient UK investment accounts). Last week, it was the second most bought stock on Hargreaves Lansdown.
Anyone who bought the stock last week will be laughing today. Yesterday, the stock surged a whopping 26%!
Past performance is not indicative of future results. Also, please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
The business
Taking a closer look at this organisation, as it’s certainly interesting.
In the past, MicroStrategy was a business intelligence and analytics software company (it still offers these solutions today).
However, in 2020, the CEO at the time, Michael Saylor (who is now executive chairman), decided to start buying Bitcoin.
Today, the company is the largest corporate holder of the crypto-asset globally, and it says it’s the world’s first ‘Bitcoin Treasury Company’.
“Our focus remains to increase value generated to our shareholders by leveraging the digital transformation of capital”, wrote President and CEO Phong Le in the company’s recent Q3 results.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
High risk
From an investment perspective, however, I see it as high risk.
Right now, the company is not generating any revenue growth. Last quarter, revenue fell 10.3% year on year to $116.1m.
Meanwhile, it is also losing money. Last quarter, it posted a net loss of $340.2m, or $1.72 per share on a diluted basis.
On top of this, the company plans to raise a lot of money in the years ahead to buy more Bitcoin (it plans to raise $42bn over the next three years). This could dilute existing shareholders’ positions.
Of course, if the Bitcoin price continues to surge, the MicroStrategy share price is likely to rise as well. However, there are no guarantees that Bitcoin will continue to rise. And if the Bitcoin price was to slump, the MicroStrategy share price would most likely slump too.
So, investors really need to weigh up risk and reward here before investing.
My view
Personally, I won’t be buying the stock. For me, there are too many variables, and the risk level is too high.
But I can see the appeal of this stock. The fact that it can be held inside a Stocks and Shares ISA or SIPP is a huge plus as one can potentially profit from Bitcoin tax-free.
