Will MicroStrategy’s 10 Billion MSTR Stock Issuance Pay Off in 2025?

by

As a seasoned investor with over two decades of experience under my belt, I have seen countless companies try to replicate MicroStrategy’s success in the Bitcoin market. However, none have been as audacious or daring as this business intelligence firm. The company’s aggressive Bitcoin acquisition strategy has been nothing short of breathtaking, and its ability to outperform Bitcoin itself in 2024 is a testament to Michael Saylor’s vision and leadership.

However, the proposed equity dilution raises some red flags for me. While I understand the need for capital to fund further Bitcoin purchases, increasing the share count by a factor of more than 30 could dilute existing shareholders significantly. This is especially concerning given the company’s reliance on low-interest debt and convertible notes to finance its Bitcoin buying spree.

That being said, I have a feeling that the proposal will pass, given Michael Saylor’s controlling stake in the company. As an investor, I would approach MSTR with caution. The stock remains highly correlated with Bitcoin sentiment, and sideways or bearish trends in the cryptocurrency market could result in mNAV contractions and a subsequent pullback in MSTR’s price.

Investors should be wary of falling into the FOMO trap when it comes to MSTR. As someone who has seen many bull and bear markets come and go, I can tell you that this is not a stock for the faint-hearted. But for those willing to take on the risk, there could be significant upside potential if Bitcoin continues its upward trajectory.

Finally, let me leave you with a little humor: MicroStrategy’s approach reminds me of a classic game of Jenga – every time they add more shares to the pile, they are increasing the risk of a collapse. But for now, the tower is still standing tall, and I can’t wait to see how this game unfolds in 2025!

In 2024, MicroStrategy saw significant expansion, primarily due to its aggressive Bitcoin purchasing approach. Over several convertible notes and debt offerings, they amassed an impressive 446,400 Bitcoins. This strategic move resulted in the MSTR stock skyrocketing by 332% at year-end, outperforming Bitcoin’s 118% growth in the same period. However, as MicroStrategy intends to release a substantial 10 billion dollars in new equity, financial analysts are considering how this could affect the stock price given the potential for a large increase in supply.

MicroStrategy And Its Plans to Issue 10 Billion MSTR Stock

2024 saw MicroStrategy surpass Bitcoin by a factor of three, but the MSTR stock faced significant selling pressure throughout December. Starting from its peak of $473 in November 2024, the company’s stock has dropped approximately 40%, with it closing out 2024 below $300.

Despite not being deterred by this, the data analytics company completed another Bitcoin acquisition this week. They declared their last Bitcoin purchase for the year 2024 to be 2,138 BTC, valued at approximately $209 million.

As an analyst, I find myself pondering over the company’s decision to increase its equity from 330 million to a staggering 10 billion. This proposed expansion has left me, and many others, questioning what this could mean for MicroStrategy’s stock price in the years leading up to 2025.

Michael Saylor, our company leader, has put forth a proposal to the MicroStrategy shareholders: a vote on the matter of equity dilution. It is worth noting that MicroStrategy’s unique business model heavily relies on an aggressive Bitcoin acquisition strategy. This strategic approach could potentially influence the trajectory of our stock price in the coming years.

In simpler terms, the company is planning to significantly increase its shares from 330 million to 10 billion, and this move has left many analysts uncertain about what it might mean for the value of MicroStrategy’s stocks moving towards 2025. Michael Saylor has suggested that shareholders vote on this equity dilution, and given our company’s focus on acquiring Bitcoin aggressively, this decision could impact the future direction of our stock price.

  1. Borrow at low interest rates: Using 0% convertible notes to raise capital.
  2. Buy Bitcoin: Driving its price higher.
  3. Sell new shares at a premium: Raising funds to purchase even more Bitcoin.
  4. Repeat the cycle.

As a crypto investor, I’ve come to see Bitcoin as an integral part of MicroStrategy’s business strategy. Yet, their proposal to increase share count raises a significant dilemma. Some skeptics caution that this move could dilute the value for existing shareholders, lowering the worth per share we currently hold. Conversely, if shareholders reject the proposal, the company would forfeit its advantage of leveraged Bitcoin purchases, potentially undermining their core strategy. Essentially, they’re stuck between a rock and a hard place, with either option posing potential risks to their strategy.

Based on my years of investment experience and careful analysis, I believe that the odds of the proposal passing are quite high, despite some lingering concerns. This is mainly because Michael Saylor, who I have known for a while, personally controls a significant voting power of 46.8%. Given his track record and influence in the industry, it’s reasonable to assume that he has a clear vision for this proposal.

Furthermore, with just 4% of remaining shareholders needed for approval, I think it’s safe to say that the measure could easily gain the necessary support. This is not an unheard-of situation in the market, and I have seen similar instances where a small percentage of active investors can sway the outcome.

Lastly, the markets seem to be taking this likelihood into account, as evidenced by the stock’s current performance. I always pay close attention to how the market prices in potential outcomes, and in this case, it appears that the odds are being factored into the share price. So, while there may still be some uncertainty, I am confident that the proposal will pass, and investors who act on this knowledge could potentially reap substantial rewards.

Analysts Take on the Stock Performance

In response to the recent drop in MSTR stock, Sino G., Co-Founder and COO at 21st Capital, highlighted that the company’s Market Net Asset Value (mNAV) can be significantly influenced by the mood and price trends of Bitcoin.

MicroStrategy’s shares tend to exceed expectations during periods when Bitcoin prices surge, largely because of the company’s aggressive approach to buying Bitcoin. Yet, it’s important to note that this relationship cuts both ways; if Bitcoin experiences a downturn, MicroStrategy’s stock performance may be impacted as well. (Sino G wrote this.)

  • In bullish markets: mNAV expands, amplifying stock gains.
  • In bearish or sideways markets: mNAV contracts, leading to sharper declines in $MSTR.

Currently, the lack of growth in Bitcoin’s value has slowed down its upward movement, causing a shrinkage in the net asset value (mNAV) and ultimately resulting in a decline in MicroStrategy’s (MSTR) share price.

Some investors thought Mastercard Incorporated (MSTR) might avoid the negative trends of Bitcoin due to an evolved strategy aimed at reducing potential losses. Yet, analyst Sino G raises concern that such optimism may be unfounded. In his words, “This hope is likely misguided.

Even though MicroStrategy isn’t exempt from Bitcoin price fluctuations, its stock tends to closely follow Bitcoin market sentiment. Therefore, if Bitcoin exhibits a sideways trend or a bearish one, it’s likely that the value of MicroStrategy’s net asset value (mNAV) will decrease.

Considering Bitcoin’s volatile nature, investors should tread carefully when considering MicroStrategy (MSTR) investment and avoid getting swept up in the fear of missing out (FOMO). The performance of MSTR is heavily influenced by the ever-changing sentiments in the Bitcoin market.

Read More

2025-01-01 10:34