Stock Thread (11 Viewers)

[Bob Sacamano]

I'm not suggesting any of that warrants any action RE: the stock. Just what the outcome will be when the new FASB rule takes effect.

 

[stbugs]

Mark my words, $MSTR gonna run up 30%+ next week.

Currently at $1,238.

What is happening next week that might drive up the price? ER??

Earnings, which I think they will 5x the estimates just based on the new accounting rules.

Also think we hit btc new all time highs by next friday with price discovery potentially getting wild.

This is the part that is confusing to me ...
so the company isn't doing anything to generate more revenue or profit, no new ideas or products, ... they are just changing how they report earnings so that it SHOWS more profit.
I don't see how this makes the company / stock more valuable but apparently it does.

The company is currently undervalued due to accounting rules. As I understand it...

Current State: You buy BTC at $70k. BTC value craters to $30k. You have to re-evaluate the carrying value of that crypto (annually, I believe), and if it is impaired, you recognize that loss as a reduction of pre-tax income (You just lost $40k * # of BTC you hold).

If that crypto then goes back up to $70k by the point your annual re-valuation takes place, it's obviously good for your company, but right now you can't recognize that increase in the value of your impaired BTC. They remain valued at $30k on your balance sheet.

Think about the volatility in crypto. For a company like MSTR, that means their balance sheet for the BTC they've held since '21-'22 reflects values significantly below current value.

Revised Rules: Effective in 2025, but apparently able to be implemented sooner, companies are allowed to switch to a Fair Value methodology. Companies like MSTR must revalue quarterly to recognize the Fair Value of their crypto. So those shares that have been on heir balance sheet at $30k will immediately snap back to $60k+ on their balance sheet going forward. They become a much more valuable company by accounting standards. And that increase in value will pass through to their bottom line as income.

It doesn't change the "real" value of the company. But lots of accounting requirements cause divergence between balance sheet value and liquidation value, and they can swing both ways.

I think I’d disagree on the undervalued part. That’s been a short seller argument that if you buy MSTR as a BTC vehicle you are paying way more than the current spot price of BTC. The market cap is $22B and the BTC holdings are $14B. Not sure how much debt they have because they have been buying more BTC by selling debt but as you can see buying a share would get you around 60% of the share price in BTC. Buy BTC via ETF and you get 100% of the share price you pay.

I think the accounting rule change is only there to hope that they can get into the S&P index, hoping that drives up the price, which again would mean you are getting less BTC per share.

A change in accounting rules and nothing else is going to boost the value of the assets they hold on their balance sheet. The value of those assets is understated relative to market value.

However you want to parse the words or however differently you want to state it, their balance sheet is valued below (but not undervalued?) what it will be when the accounting rule change is implemented.

I’m just saying undervalued in normal terms would not be correct. It’s a $22B company with no revenue growth and not significant operational earnings. The balance sheet and accounting method boils down to getting on the S&P index. People don’t care about the balance sheet. They care about the $14B in BTC, $22B market cap and possibly the company debt (to finance much of the BTC). The real balance sheet may improve but investors are already looking at their “BTC” balance sheet so to speak. That’s where if you liquidated the company for $22B, you’d only come back with $14B in BTC minus any debt payoff.

 

[stbugs]

I'm not suggesting any of that warrants any action RE: the stock. Just what the outcome will be when the new FASB rule takes effect.

Understood, that’s where I think it could be misread with “undervalued” as in the market cap being less than the cash on hand type situation.

 

[Desert_Power]

I’m far from a bitcoin bull but, if I were, I’d think there are more efficient ways of expressing that view than investing in a company/person with a history of fraudulent financial reporting

 

[SFBayDuck]

I’m far from a bitcoin bull but, if I were, I’d think there are more efficient ways of expressing that view than investing in a company/person with a history of fraudulent financial reporting

I treat my small position there as a leveraged play on BTC, so I expect huge volatility and understand the high risk.

 

[Peggy]

Yeah MSTR and BTC shouldn't be in the stock thread. Probably the crypto thread or even better the gambling thread