This Company Is The Biggest Short In The Market

How all-in is MicroStrategy on Bitcoin?

It recently offered $600 million 0% coupon convertible debt to buy more Bitcoin. It increased the offering to $1.05 billion to meet demand.

Think about this for a minute. Investors gobbled up a bond that pays zero interest with the hopes that it can be converted to stock for a profit. Convertible bonds are common, but investors typically get paid interest while waiting to see whether the convertible feature will be profitable.

Buyers of the bonds were made fully aware that the sole purpose of the offering was to buy more Bitcoin. Not for general corporate purposes and not to pay down debt, but to speculate on more Bitcoin…

This is not something that happens at bottoms.

Some may ask, what about Tesla (Nasdaq: TSLA) and its recent $1.5 billion purchase of Bitcoin?

Tesla has $19.4 billion in cash. If it wants to diversify a small portion of its cash holding into Bitcoin, I won’t protest too much.

More importantly, Tesla hasn’t changed its business model. It still focuses on producing cars and solar walls. While it may hold Bitcoin, it’s not in the business of Bitcoin.

I understand the argument about the U.S. dollar being a fiat currency and about how the enormous government debt is going to erode the value of the dollar over time.

Again, if a company wants to protect shareholders from a dollar devaluation by diversifying its holdings into other currencies, I’m fine with that.

But to hold so much cash in an extremely speculative asset and to change the business model to gamble on the asset is a complete breach of fiduciary duty.

Should Bitcoin fall in price, shareholders will be hurt significantly. And I suspect executives and directors will be hauled into court.

I can’t recall a more irresponsible use of shareholders’ capital in my 25 years in the market – and that includes some boneheaded acquisitions and spending during the dot-com bubble.

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