A smarter bet than Bitcoin itself?

MicroStrategy ( NASDAQ:MSTR ) , a company that specializes in business intelligence, surged 12% on Tuesday amid Bitcoin rallies. After the purchase of 51,780 BTC for approximately $4.6 billion, MicroStrategy now holds 331,200 BTC with an average price of $88,627 per BTC. If the total supply of Bitcoin is 21 million BTC, this means that MicroStrategy owns 1.57% of the total BTC, making it a significant owner.

MicroStrategy started its Bitcoin investment strategy in 2020 to position it as a hedge against inflation and diversify the treasury. First, they bought the cryptocurrency at $49,874 per Bitcoin and averages up to $88,627 per Bitcoin.

Now the company plans to raise $1.75 billion to help them buy more Bitcoin by releasing zero-convertible notes that will expire in 2029. The plan is to raise more up to $42 billion over the next three years to further support his Bitcoin investment.

MicroStrategy shares have improved 509.21% year-to-date, while Bitcoin’s value has only improved 107.17% over the same period. In the last five years, MicroStrategy has seen an astonishing 2,398% increase in value, and Bitcoin itself is 1,148% higher over the same period. Looking at these numbers, it can therefore be deduced that buying MicroStrategy shares can be more profitable than investing directly in bitcoins.

The question arises, is MicroStrategy really making money or just riding the Bitcoin rally?

From the image above, we can see that MicroStrategy had its net income of $429 million, despite having only $804k in operating income. You see the green bands at the end; the net income is largely due to a significant tax advantage, as shown by the negative tax of DKK 553.6 million. USD.

The negative tax of $553.6 million shows that the company got a tax refund, or that the company got more than it expected in taxes that helped it push up its net income. So MicroStrategy’s actual operations generated no profitability and the stated net profit was derived from the tax return.

So, roughly speaking, it is assumed that the skyrocketing shares of MicroStrategy are only dependent on Bitcoin rally.

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This article first appeared on GuruFocus.