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MicroStrategy short interest: MSTR shorts skyrocket amid plunging Bitcoin price, mounting losses

By Rob Griffin

Edited by Vanessa Kintu

16:51, 9 November 2022

Bitcoin BTC representation coin with MicroStrategy logo in background.
Concerns about MicroStrategy’s focus on bitcoin led to a number of short bets on the company. Photo: JOCA_PH / Shutterstock

MicroStrategy (MSTR), the business intelligence specialist, could potentially benefit from encountering a short squeeze if bitcoin (BTC) manages to rally. The US company, which is a significant buyer of the cryptocurrency, has found itself shorted by institutions over the last few months. 

Is there potential for an MSTR short squeeze to cause the stock price to rise over the coming months if bitcoin continues to make progress?

MSTR live price chart

In this analysis, we look at the MicroStrategy short interest story, examine the company’s prospects and consider where the MSTR stock price may go over the coming year.

What is MicroStrategy?

Founded in 1989, MicroStrategy (MSTR) is based in Virginia, US. It trades on the Nasdaq under the MSTR ticker. The company provides business intelligence, mobile software and cloud-based services to its clients, but is equally well known for being a prolific buyer of cryptocurrency.

The company has declared its objectives are to “acquire and hold bitcoin”, as well as growing its enterprise analytics software business, stating:

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“We believe that undertaking these two, interdependent corporate strategies serves as a key differentiator for our business.”

MSTR latest news

On 1 November, 2022, Andrew Kang, MicroStrategy’s CFO, reaffirmed the commitment to the strategy as the company reported third quarter 2022 results:

“MicroStrategy acquired approximately 301 additional bitcoins this quarter and remains the world’s largest publicly traded corporate owner of bitcoin, with total holdings of 130,000 bitcoins.”

Kang also said he was encouraged by the Financial Accounting Standards Board announcement that cryptocurrencies should be measured at fair market value:

“If finally adopted and implemented, we believe fair value accounting will improve upon the current, unfavourable intangible accounting treatment applicable to bitcoin holdings and will promote additional institutional adoption of bitcoin as an asset class.”

MicroStrategy short interest: What’s happened?

Concerns about MicroStrategy’s focus on bitcoin led to a record number of short bets on the company during August. Analytics firm S3 Partners found 51% of available shares were sold short – 4.73 million – which carried a notional value of $1.35bn.

MSTR short interest, which is the volume of shares sold short but not yet covered or closed out, has also risen in recent months, according to MarketBeat’s data. It noted investors had sold 3,210,000 shares short of MSTR, as of 15 October 2022. This means the MSTR short interest ratio is currently 5.8.

A ratio of between one and four indicates strong positive sentiment on a stock, while above 10 suggests significant pessimism.

GME

28.89 Price
-1.950% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.13

AMD

161.25 Price
-9.130% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.12

NVDA

118.03 Price
-6.630% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.11

TSLA

247.19 Price
-3.740% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.14

Bitcoin movements and the MSTR stock price

MSTR 5-year historical performance

Bitcoin has had a pretty torrid year. In early January, the cryptocurrency stood at $47,739.42; on 9 November, it was at $17,782.10 – a fall of 63%. However, bitcoin was previously enjoying a more encouraging few weeks with the price being above $21,000 just a few days earlier.

The MSTR stock price has fallen 62% this year, from $558.26 in early January to $211.84 at market close on 8 November 2022.Bitcoin (BTC) 5-year historical performance

Any MicroStrategy short interest analysis must consider the recent moves of the stock price. Long investors have had slightly more cause for optimism in recent months – the MSTR stock price hovered around $150 in June.

Outlook for MSTR stock: Forecasts for 2022 and beyond

As of 9 November, the stock was rated  a ‘hold’, according to the views of two analysts compiled by TipRanks. Their views were split with one recommending ‘buy’ and the other ‘sell’. The average price target was $562.50, with a high forecast of $950 and a low of $175.00. The average price target represents a 165.53% change from the 9 November price of $211.84.

Algorithm forecaster Wallet Investor suggested the stock was an “outstanding long-term (one year) investment” that could rise to $362.10 over the coming year. The site’s five year forecast to November 2027, meanwhile, put the stock at $738.16.

Another algorithm forecaster, Gov Capital predicted was pessimistic in the short term, suggesting MSTR could end 2022 at $189.25. However, it had the stock price surging to $514.75 by December 2023.

If you’re considering investing in MicroStrategy stock, please keep in mind that analysts’ forecasts can be wrong. It’s important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.

FAQs

What is the short interest on MicroStrategy?

As far as MSTR stock short interest is concerned, investors had sold 3,210,000 shares short of MSTR, as of 15 October 2022, according to MarketBeat. This means the short interest ratio is currently 5.8. Generally, a ratio of one to four indicates positive sentiment on a stock.

Is MSFT a buy or sell?

The stock is a ‘hold’, based on the views of two analysts compiled by TipRanks. However, it’s important to remember that analysts can be wrong. You need to carry out your own research. Also consider if you believe an MSTR short squeeze is a reality.

Always conduct your own due diligence before trading, looking at the latest news, technical and fundamental analysis and a wide range of expert commentary. Remember, past performance does not guarantee future returns. And never trade money you cannot afford to lose.

Is MicroStrategy a good investment?

Only you can decide whether MicroStrategy is a good investment for you. Your decision should depend on a variety of factors, including your portfolio composition, investment goals and risk profile. Different investment strategies will suit different investment goals with short or long-term focus. You should do your own research. 

Remember that past performance is no guarantee of future success. And never invest money you cannot afford to lose.

Markets in this article

BTC/USD
Bitcoin / USD
64486.25 USD
-249.85 -0.390%
MSTR
MicroStrategy Incorporated
1578.12 USD
-84.51 -5.090%

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You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
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