Shorting MicroStrategy, can Citron Capital win this time?

原作者：燒法夜123、前瞻新聞

On November 21, Citron Capital tweeted that it was shorting MicroStrategy shares. On one side is the legendary short seller on Wall Street, and on the other side is the strongest U.S. stock in 2024. Is Citron Capital going to lose again? This article will show you the stories behind the two legendary companies.

Citron, the short-selling giant, has always been a magical presence in the capital market, and it has appeared in many cycles. In 2012, it damaged the reputation of Qihoo and Sohu by shorting them. In 2021, it was forced to close its position by shorting GameStop. In 2022, it also shorted Ethereum, which has a market value of 130 billion.

Since Citron Capital announced yesterday that it was shorting MicroStrategy, MicroStrategys stock price has fallen, at one point falling 30% from its intraday high.

Citron Capital’s Short Selling History

Citron Capital, a short-selling institution with great influence in the United States, was founded in 2001. In the past six years, it has successively attacked 20 Chinese concept stock companies, causing the stock prices of 15 companies to fall by more than 80% and 7 companies to delist. At that time, Citron Capital was in full swing and began to short Evergrande. It wrote in the report, Evergrandes ending is already doomed, and the only thing that is uncertain is the time. In the end, Evergrandes thunderbolt also confirmed Citrons prediction.

For a time, Citron was in the limelight. In 2021, GameStop entered the short-selling vision of major institutions. GameStop, as the worlds largest game retail chain brand and offline game dealer. At that time, its business had been abandoned by the market and its market share was taken away by major companies. It seemed that the short sellers would win this battle again. But the emergence of Roaring Cat staged a wonderful short squeeze war for Wall Street. The identity behind Roaring Cat is Keith Gill, but everyone did not know it at the time. Under the fermentation of Roaring Cat and WSB, retail investors doubled the stock from 19.95 to 39.91. Citron Capital looked at the severely overvalued stock price and couldnt sit still. On January 19, it officially launched a short-selling report on GME, and scolded retail investors who bought stocks at high prices as idiots. Retail investors fought back angrily, and with Musk tweeting Gamestonk!, the stock price once rushed to US$483. In this battle, Citron Capital lost 100% and closed its position at $90, while another capital, Melvin Capital, also lost as much as 6.8 billion.

After this incident, Citron announced that it would abandon its 20-year-long short-selling research, no longer publish short-selling reports, and shift its focus to providing long-term trading opportunities for individual investors. It seems that the era of short-selling institutions has come to an end. Major capitals have been defeated, and retail investors seem to have won the final victory in the battle against Wall Street, but Robinhoods operation of unplugging the network cable caused the stock price to fall rapidly. In the GME incident, it was still a victory for a few people in the end.

Since then, Citron did not stop short selling as it said. In 2022, it launched a short selling on Ethereum, which had a market value of 130 billion. Now the market value of Ethereum has tripled.

2024 The Strongest US Stock Micro Strategy

MicroStrategy, a company more legendary than Citron Capital, is a top-notch conspiracy.

MicroStrategy was founded in 1989 by Michael Saylor, Sanju Bansal and Thomas Spahr. Initially, MicroStrategy was just a consulting firm focusing on multidimensional modeling and simulation. When Saylor was young, he was not optimistic about Bitcoin and even satirized virtual currency in 2013. But since 2020, MicroStrategy has begun to explore alternative assets other than cash, using its financial assets to purchase more than 21,000 Bitcoins, gradually becoming the worlds largest holder of Bitcoin listed companies. MicroStrategy has systematically invested heavily in Bitcoin, including taking on debt to increase its Bitcoin holdings. Currently, the listed company with the most Bitcoin in the world has a par profit of more than US$15 billion in just two years, and its trading volume has exceeded the highest level of Nvidias US stocks on the day.

So what is MicroStrategys strategy? How does it leverage huge profits?

Simply put, MicroStrategy is currently a company that specializes in buying BTC. By buying Bitcoin, it drives up the price of Bitcoin, and its own stock price also rises accordingly. It borrows money to buy Bitcoin again, and the price of Bitcoin soars again, and the stock price rises further. It raises funds to buy more Bitcoin again, and the stock price continues to rise, and its net assets per share and earnings continue to rise…

This flywheel model cant help but remind people of Luna, whose thunderstorm incident still makes people feel uneasy. In addition, MicroStrategy currently has a 300% premium on Bitcoin. MSTR investors actually paid $250,000 for each Bitcoin, and the market price is less than $100,000. Its stock price also has a certain premium.

Short selling, win or lose?

Taking this opportunity, Citron Capital once again took action and tweeted on November 21:

“Nearly four years ago, Citron was the first to tell readers that MicroStrategy (MSTR) was the ultimate way to invest in Bitcoin, setting a target of $700.

Fast forward to today: MSTR has surged to over $5,000 (adjusted). Hats off to Michael Saylor for his visionary Bitcoin strategy.

Now, as Bitcoin investing becomes easier than ever, MSTRs trading volume has completely decoupled from Bitcoin fundamentals. While Citron remains bullish on Bitcoin, we have hedged our position by shorting MSTR.

All due respect to Saylor, but even he had to know that the MSTR was overheating.”

In fact, Citron is not the first company to suggest hedging bullish Bitcoin positions by shorting MSTR. In March of this year, another well-known institution, Kerrisdale Capital Management, also made a similar suggestion, saying that it would go long on Bitcoin but short MSTRs stock.

Short sellers strike again, MicroStrategys stock price drops. Is this another Hunt family or will it continue to rise? Is this a market forecast or another mistake?

From the data, the transaction volume of MSTZ (reverse 2x short MSTR ETF) increased on November 21, with a single-day transaction volume approaching $1.53 billion, and the previous single-day transaction volume was $84 million. From a fundamental perspective, MicroStrategy now has a 300% premium to Bitcoin, and with the convenience of buying BTC after the ETF is approved. In the long run, MSTR may lose its uniqueness premium.

However, there are still many supporters (source: @0x_Todd) who are optimistic about MSTR, saying:

• MicroStrategy is not Luna, its safety cushion is much thicker. According to recent statistics, the average cost of MicroStrategy Bitcoin is $49,874, and the current floating profit is close to 100%, which is a super thick safety cushion.

• MicroStrategy increased its holdings of Bitcoin by selling bonds and stocks. MicroStrategy borrowed over-the-counter leverage and had no liquidation mechanism. Angry creditors could at most convert their bonds into MSTR stocks at a specified time, and then angrily dump them into the market.

• The nearest repayment date is in 2027, which is still more than two years away. Even if MSTR is smashed to zero, it still does not need to be forced to sell these 比特幣s, because the earliest due date for MicroStrategys debt repayment is February 2027.

• The only soft threat at the moment is Bitcoin whales, and whales prefer a win-win situation.

So, is MicroStrategys crazy selling of Bitcoin a top strategy that will spiral upward and eventually reach a market value of one trillion, or is it a dance that will eventually end? I believe time will give the answer.

This article is sourced from the internet: Shorting MicroStrategy, can Citron Capital win this time?