As the MSTR stock dives, is the 183% yielding MSTY a better buy?

MicroStrategy (MSTR) stock has entered a bear market, plunging over 35% from its high, driven by investor skepticism regarding its Bitcoin treasury strategy's valuation premium, market saturation, and shareholder dilution from funding Bitcoin purchases. While the Yieldmax MSTR Option Income Strategy ETF (MSTY) offers a substantial 183% dividend yield through a covered call strategy on MSTR, its total returns have consistently underperformed MSTR, suggesting the underlying stock remains the better investment despite its volatility.

Analysis

MicroStrategy (MSTR) has entered a bear market, with its stock falling 35% from its year-to-date high, driven by a decoupling from Bitcoin and significant fundamental concerns. Investors are questioning the company's valuation premium, as its $100 billion enterprise value and $69 billion market cap materially exceed its $69 billion in Bitcoin holdings. This skepticism is amplified by the company's collapsing NAV multiple, which has plunged from 3.1 to 1.227, and a strategic shift to fund further Bitcoin purchases through dilutive share sales—a practice previously avoided. The Yieldmax MSTR Option Income Strategy ETF (MSTY) is presented as an alternative, offering an extraordinary 183% dividend yield generated from a covered call strategy on MSTR. However, despite this yield, MSTY's total return performance has been inferior to MSTR's. Year-to-date, MSTY's total return is 2.22% compared to MSTR's 3.83%, and over the last 30 days, MSTY posted a -16% return versus MSTR's -12.3%, indicating that the covered call strategy's income generation does not currently compensate for its capped upside and downside risk exposure.

Key Decisions for Investors

• Investors in MSTR should be cautious of the significant valuation premium over its Bitcoin holdings and the ongoing shareholder dilution used to fund new purchases, as highlighted by the collapsing NAV multiple.
• The 183% yield offered by the MSTY ETF is misleading, as its total return has consistently underperformed MSTR, suggesting the covered call strategy is not effectively compensating for the underlying stock's volatility and is capping potential recovery.
• Monitor MSTR's NAV multiple and the rate of its at-the-market (ATM) share offerings, as these metrics are critical indicators of the sustainability of its strategy and the level of risk to equity holders.