MicroStrategy Down 90% in 24 Hours, Here’s Why

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As a seasoned analyst with over two decades of experience in the financial markets, I have witnessed countless ups and downs, bull runs, and bear markets. However, the recent 90% plunge in MicroStrategy’s shares within a single day is a sight to behold, even for someone like me who has seen it all.

In simple terms, over a span of 24 hours, the worth of MicroStrategy’s shares – one of the biggest companies owning Bitcoin (BTC) – declined by approximately 90%. This drop can be attributed to the preliminary announcement about a 10-for-1 stock split.

As we speak, MicroStrategy’s shares are being transacted for approximately $124.69 each, showing a substantial drop of around 81% compared to the start of the year (year-to-date).

Bitcoin yet to recover

The stock division at MicroStrategy occurs alongside the current fluctuations in the Bitcoin market. While the primary digital currency experienced a minor boost of 0.5% within the last day, it has dropped more than 11% over the past week.

MicroStrategy, led by Chairman Michael Saylor and co-founder, owns approximately $2 billion worth of Bitcoin. In an earlier report by U.Today, it was revealed that the company’s Bitcoin holdings have grown to 226,500 coins. Remarkably, MicroStrategy started buying Bitcoin back in 2020 and has continued doing so since then. Lately, the firm financed its Bitcoin purchase with a $700 million bond issued to investors, having a maturity of five years.

Currently, Bitcoin hasn’t managed to reach its former peaks again, as it was trading around $49,000 last week which has impacted MicroStrategy’s share price negatively. At the moment, Bitcoin is being traded at $57,389, and the trading volume has decreased by 9.9% to about $39.9 billion.

Despite MicroStrategy providing various other services, analysts think that its investment in Bitcoin could influence the value of its shares. Critic Peter Schiff contends that the company might be compelled to liquidate its Bitcoin assets due to creditor demands. In Schiff’s view, such losses for Bitcoin are unavoidable since he considers it valueless.

MicroStrategy’s efforts to boost liquidity

In spite of persistent difficulties, the declared 10-to-1 stock division is intended to increase accessibility and ease of trading for users. This stock split, implemented on August 1, grants each owner of MSTR Class A stock nine extra shares of the same class.

Similarly, just as this distribution applies to owners of Class A shares, it also applies to those who own Class B shares in MicroStrategy. It’s important to note that the stock split does not affect the voting rights of any shareholder.

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2024-08-08 19:33