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

• Warning! GuruFocus has detected 8 Warning Signs with MSTR.

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

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

MicroStrategy shares have improved by 509.21% year to date while Bitcoin's value has improved by only 107.17% in the same period. For the last five years, MicroStrategy had a stunning 2,398% increase in the value, and Bitcoin itself is 1,148% higher in the same period. Looking at these figures it can therefore be deduced that buying MicroStrategy shares might be more profitable than investing directly in bitcoins.

The question looms whether MicroStrategy really make money or just merely riding the Bitcoin rally?

From the picture above we can see that MicroStrategy had its net income at $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 substantial tax benefit as shown by the negative tax of $553.6 million.

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

So, roughly it is assumed that the soaring shares of MicroStrategy relies on Bitcoin rally only.

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This article first appeared on GuruFocus.