Strategy shares, traded on Wall Street and known for its Bitcoin-focused strategies, have recently ranked first among the companies with the most short positions in the global stock markets. Approximately 14 percent of the shares of the company, which has a market value of $41.6 billion, are sold short. This ratio makes Strategy stand out among similar-sized companies, according to data compiled by Goldman Sachs and FactSet.
Close Relationship with Bitcoin and the Structure of the Company
Although Strategy continues its traditional activities in the software industry, it is known as a company that has accumulated a significant amount of Bitcoin in recent years under the leadership of chairman Michael Saylor and integrated this asset into the balance sheet. Its shares act as a highly leveraged financial instrument against changes in Bitcoin price. The company has purchased more than 700,000 Bitcoins to date, funded by a convertible bond issuance, equity sales and proceeds from its software business.
Strategies Behind Short Positions
Increased short positions on the company’s shares are explained not only by the expectation of a decline in the market, but also by more complex trading strategies. In particular, institutional investors and hedge funds are trying to take advantage of the difference between the two markets by short selling Strategy shares, while opening futures or spot positions through instruments such as iShares Bitcoin Trust (IBIT). It is reported that large trading companies such as Jane Street also have important positions in both IBIT and Strategy, and that they focus on remaining neutral in the markets with such two-way transactions.
The fact that Strategy shares have relatively low free float shares paves the way for sharp price movements in the market. When there are sudden increases in Bitcoin, investors taking short positions may have to close their positions quickly, which may result in rapid increases in the share price. Conversely, losses in value in Bitcoin may lead to increased borrowing risks and deepening pressures on the balance sheet due to the leveraged structure of the company.
The fact that the company directly benefited from the recent rise in Bitcoin price had a positive impact on its shares. While Bitcoin approached $68,000 with a 6.5 percent increase, Strategy shares recorded an 8 percent increase on a daily basis.
There is an unrealized loss of approximately $7 billion on Strategy’s balance sheet. These losses are calculated based on the current market value of Bitcoin assets and there is no actual sale. Markets reprice the risk profile of the company’s assets according to the fluctuations in Bitcoin.
The increasing short position rate is remarkable considering the size of the company. It is stated that hedge funds hold approximately 3 percent of the company’s shares and more than 50 funds have announced positions. However, not all short positions are based on a clear decline expectation; It is reported that some positions are associated with market neutral arbitrage strategies.
With the new Bitcoin purchase at the beginning of the week, the company expanded its Bitcoin portfolio for the hundredth time since 2020. In the latest purchase, 592 Bitcoins were purchased for approximately $39.8 million, and the purchases were financed with resources the company obtained through its IPO.
With the latest purchase, the company’s total Bitcoin assets reached 717,722. This amount represents a total of $54.56 billion spent during their acquisition and continues to keep the company as the largest institutional holder of Bitcoin.
