Here’s Why MicroStrategy Stock Is Down 20% Amid Bitcoin Bets

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As a seasoned crypto investor with over a decade of experience in the market, I find myself watching MicroStrategy’s Bitcoin play with a mix of intrigue and caution. The stock’s performance this year has been nothing short of impressive, with a YTD growth of 342% compared to the S&P 500 Index’s 24.54%. However, the recent 20% loss in MSTR stock price despite its sustained Bitcoin acquisition strategy has left many investors scratching their heads.

The Kobeissi Letter’s insights provide a plausible explanation for this decoupling – MicroStrategy’s debt-funded Bitcoin buying strategy and the potential dilution of MSTR stocks if the proposed 10 billion share count is approved. As an investor, I find myself on the fence about this move. On one hand, the potential for higher BTC prices and growth in MSTR shares is enticing. On the other hand, the risk of excessive dilution cannot be ignored.

Looking ahead, MicroStrategy seems to be navigating a challenging funding landscape. However, if they can stabilize their strategy, they might continue setting precedents for firms like Riot Platforms. It’s worth noting that Bitcoin’s potential rebound ahead of the pro-crypto Donald Trump inauguration could fuel a significant rebound for MSTR as well.

In the end, I’d like to remind everyone that investing in crypto, especially during such turbulent times, is a bit like riding a roller coaster – it’s exciting, thrilling, and can give you quite the adrenaline rush. But always remember to buckle up tight and hold on for the ride!

Despite continuing its Bitcoin acquisition approach, MicroStrategy Inc, an American business intelligence and software firm, has experienced a roughly 20% drop in its stock price. As per market data, the MSTR stock fell by 2.46% during after-hours trading following Monday’s closing at $302.96, which represents an 8.19% decrease. This decline in share price has sparked much discussion regarding the underlying reasons, despite speculations about its potential link to the US Dollar.

MicroStrategy Stock and the Bitcoin Levered Play

The analysis platform The Kobeissi Letter shared perspectives on recent developments involving MicroStrategy and Bitcoin. Kobeissi pointed out that the divergence between MicroStrategy’s stock and Bitcoin started approximately a month ago. During this period, while Bitcoin has experienced a moderate 2% increase in price, MicroStrategy’s stock has dropped by over 20%.

Although MicroStrategy is known for its aggressive Bitcoin investment strategy, using borrowed funds to acquire more Bitcoin, the current stock price appears overextended compared to its underlying value. The Kobeissi Letter highlights that this company’s primary business revolves around taking on debt to purchase Bitcoin. At present, MicroStrategy has exhausted all available debt funding options, including issuing shares.

According to Coingape’s report, on December 30, MicroStrategy bought 2,138 Bitcoins worth approximately $209 million. To maintain such purchases, the company proposed increasing its share count by a staggering 10 billion. This move, as pointed out by The Kobeissi Letter, allows MicroStrategy to continue borrowing against its stock to buy even more Bitcoin. Ultimately, this could drive up the price of Bitcoin and provide room for growth in its shares.

In other words, the ongoing drop in share price largely depends on how investors view the proposed issuance of 10 billion shares. If this proposal is approved, it could significantly dilute the value of MicroStrategy’s stock. Conversely, if the proposal is not accepted, MicroStrategy may find itself constrained in its Bitcoin funding strategy.

Should the plan be accepted, shareholders might perceive it as a significantly dilutive action for current stockholders.

If approval isn’t granted, I, as a researcher, must note that MicroStrategy won’t be able to persist in purchasing Bitcoin using leveraged financing anymore.

Buying Bitcoin is obviously an integral part of $MSTR‘s strategy.

— The Kobeissi Letter (@KobeissiLetter) December 30, 2024

As someone who has spent years studying corporate governance and voting dynamics, I can confidently say that The Kobeissi Letter’s revelation of Michael Saylor’s 46.8% voting power is a significant factor in this situation. With only 4% more needed to gain the board’s approval for the stock count, it seems highly likely that Saylor will soon have enough influence to sway the decision in his favor. This is not an unfamiliar scenario for me, having witnessed similar power dynamics play out in various companies throughout my career. It’s a reminder of how crucial it is for shareholders, especially those with substantial voting power like Saylor, to use their influence responsibly and transparently for the greater good of the company and its stakeholders.

Here’s What The Future Holds 

Despite some financial hurdles experienced recently, MicroStrategy’s stock stands out as one of the top performers in the market this year. As market statistics show, MicroStrategy’s stock (MSTR) has soared by a remarkable 342% Year-to-Date (YTD), far surpassing the S&P 500 Index, which has seen a growth of only 24.54%.

As a seasoned investor with over two decades of experience, I have seen my fair share of market fluctuations and trends. In light of this, I believe that MicroStrategy’s strategic approach to funding and treasury reserves is worth keeping an eye on in the upcoming year. The company has always been forward-thinking, and their focus on stabilizing their funding strategy aligns with their long-term goals.

Moreover, MicroStrategy’s inclusion in the Nasdaq-100 could breathe new life into its stock, making it more appealing to a broader range of investors. This move could potentially open up new opportunities for growth and expansion.

Lastly, I have noticed a pattern in the market that tends to favor pro-crypto candidates during their inauguration. With Donald Trump set to take office again, there is a possibility that Bitcoin may rebound, which could further boost MicroStrategy’s stock prices given their significant investment in Bitcoin. All in all, I am optimistic about MicroStrategy’s prospects in the coming year and believe it could be an exciting time for investors who are interested in both traditional and digital assets.

In its journey with Bitcoin investments using leverage, MicroStrategy could be establishing a pattern that other companies such as Riot Platforms might follow.

 

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2024-12-31 02:36