Shares of MicroStrategy Inc. (MSTR), headed by CEO Michael Saylor, took a notable hit as trading wrapped up on the latest session, triggered by news of its recent Bitcoin acquisition.
Following the company’s announcement of a substantial $209 million purchase of Bitcoin on December 30, its stock plummeted by over 8%.
This development has sparked worries among market analysts about MicroStrategy’s heavy reliance on borrowed funds in the volatile crypto landscape.
Stock Performance and Acquisition Details
The timing of the Bitcoin buy was particularly telling, taking place just an hour before the Nasdaq opened its doors for trading at 2:30 PM UTC.
In the frantic first hour, MicroStrategy’s stock fell by 5.3%, dropping from $318.89 to $302.09.
While there was a glimmer of recovery as the trading day progressed, the stock ultimately closed at $302.96, as reported by Google Finance.
After hours, it experienced an additional decline of 3.19%, ending at $293.59.
According to a regulatory filing, this latest acquisition was facilitated by selling 592,987 shares earlier that week.
This purchase marks MicroStrategy’s eighth consecutive week of increasing its Bitcoin holdings, bringing their total to 194,180 BTC since October 31.
Investor Concerns and Future Predictions
Concerns about MicroStrategy’s future were echoed by a trading analysis platform known as The Kobeissi Letter.
In a post dated December 30, the service highlighted growing investor unease regarding the company’s proposal to boost its authorized shares by a staggering $10 billion.
Analysts pointed out that the company’s current heavy leverage is the result of multiple debt issuances, compounded by convertible notes.
If the increase in shares reaches approval, projections suggest the number could balloon from 330 million to over 10 billion, a scenario that could impose serious financial challenges going forward.
Despite a dizzying 342.2% rise since January 2023, MSTR’s shares have dipped by 20.2% in just the last month.
Felix Hartmann, founder of Hartmann Capital, expressed skepticism about the road ahead for MicroStrategy’s stock.
He predicted potential severe declines, cautioning that investors betting against it might underestimate market conditions.
He noted the company could rank among the top five firms by market capitalization, yet the specter of bankruptcy still hangs overhead.
Conversely, Hartmann allowed that if Bitcoin enters a robust bull cycle, the firm might find a way to manage its debt, given its substantial Bitcoin reserves.
Company Recognition and Market Position
Meanwhile, Joe Burnett from Unchained characterized MicroStrategy’s approach as creatively geared toward “hyperbitcoinization.” He elaborated that the firm’s premium trading position allows it to sell shares at prices above their net asset value (NAV), which in turn fuels further Bitcoin acquisitions, thereby reducing financial leverage over time.
This cycle could enhance the amount of Bitcoin per share consistently.
In a significant recognition of its stature, MicroStrategy was recently added to the Nasdaq-100 index on December 23.
This achievement not only underscores its status as one of the top 100 companies by market capitalization on the Nasdaq but also highlights the firm’s prominent role within the current market landscape, alongside notable names like Palantir Technologies and Axon Enterprise.
Source: Cointelegraph
