Why is MicroStrategy stock moving higher again this week?

microstrategyfirms(MicroStrategy) Stock (NASDAQ: MSTR)The company's stock price rose again this week. According to S&P Global Market Intelligence, the company, which has staked its entire future on thebitcoin (virtual currency)The company is up 11.91 TP3T this week, and with Bitcoin near all-time highs, investors are betting on a bright future for MicroStrategy. The company's shares have risen 5,001 TP3T in the past year.

Here's why MicroStrategy shares are rising again this week.

Using Debt to Buy Bitcoin

MicroStrategy has transformed itself over the last few years from a niche software business to one that uses all of its capital and a lot of its debt to buy Bitcoin. That's its entire business strategy. So far, the strategy has worked, with its stock price rising 10,00% in the past five years and its market capitalization approaching $30 billion. Earlier this month, the company raised more convertible notes - worth $600 million - to increase its debt bet on Bitcoin.

Investors in MicroStrategy are likely to think that the company is a great place to get exposure to Bitcoin. But that logic may be flawed, given that the company's stock trades at a steep premium to the actual bitcoin holdings on its balance sheet. According to a recent short-sale report from Kerrisdale Capital, MicroStrategy's recent share price was close to 2.5 times the actual value of its Bitcoin holdings, which hardly makes sense given the small size of the company's software subsidiary.

The investment firm decided to bet on this divergence by going long Bitcoin while shorting MicroStrategy. While retail investors should be hesitant to short any company, this is a clear example of how professional investors view MicroStrategy as overvalued.

There are better ways to access Bitcoin

With the introduction of Bitcoin Exchange Traded Funds (ETFs), there is now a simpler way to access Bitcoin. The new ETFs have an annual management fee of about 0.25%, which hardly affects the investment return. If the actual Bitcoin value on the balance sheet is much lower, it makes no sense for investors who have been buying and holding for a long time to buy MicroStrategy to get exposure to Bitcoin.

MicroStrategy has done well in recent years. But it only has a small operation that actually bets on Bitcoin. Why would anyone buy MicroStrategy at that price when you can bet on Bitcoin much cheaper just by buying different assets or investment vehicles like ETFs? It doesn't make any sense. Stay away from MicroStrategy for now. There are better ways to get exposed to Bitcoin.

Should You Invest $1,000 in MicroStrategy Now?

Consider this before buying shares of MicroStrategy, Inc:

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Brett Schafer does not own any of the stocks mentioned above. the Motley Fool holds recommended bitcoins. the Motley Fool has a disclosure policy.

Why is MicroStrategy stock moving higher again this week?