MicroStrategy Just Bought More Bitcoin Despite Shareholder Risks
MicroStrategy announced today that it spent nearly $1 billion to acquire an additional 10,624 BTC, increasing its total Bitcoin holdings to 660,624 BTC.
The purchase comes at a moment of heightened scrutiny for MicroStrategy’s figurehead, Michael Saylor. The company has faced significant pressure during a broader market downturn driven by Bitcoin’s weak price performance.
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Accumulation Continues as Pressures Grow
Saylor has continued expanding MicroStrategy’s Bitcoin holdings despite sustained public scrutiny of the company’s approach.
Bitcoin’s price has weakened over the past two months, failing to reclaim the $100,000 level it lost in November and currently trading around $89,950.
MicroStrategy, now effectively a Bitcoin-focused treasury rather than a traditional software firm, has been hit hard as its valuation moves in lockstep with Bitcoin’s volatility, creating persistent headwinds.
Even so, the company has pressed ahead with new purchases. Notably, it did not buy during the recent dip to $86,000 over the weekend but instead announced its latest acquisition as Bitcoin briefly rallied to $90,615.
Some viewed the move as a way to energize supporters and maintain high morale among loyal investors. However, some analysts believe MicroStrategy’s ability to fund future Bitcoin purchases is weakening.
Analyst Novacula Occami noted that, for this latest purchase round, MicroStrategy was only able to sell $44 million of preferred stock last week, which is a very small amount compared to past capital raises.
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This suggests the market may be less willing to lend or buy their preferred equity.
Because leverage is becoming more challenging, MicroStrategy is shifting back to issuing regular shares. In this case, it sold 5.1 million MSTR shares at $181 each, which dilutes existing shareholders.
Given MicroStrategy’s current conditions, this method may soon become unsustainable.
Stock Weakness Threatens Funding Model
MicroStrategy experienced a severe downturn at the start of December when its market cap briefly fell below the net value of its Bitcoin holdings. The event produced fresh concerns about leverage, liquidity, and overall investor confidence.
The share price dropped to $156, reducing the company’s valuation to $45 billion. At the same time, the value of MicroStrategy’s Bitcoin holdings stood at roughly $55.2 billion, marking an unusual period in which the market valued the company below its underlying assets.
MicroStrategy has since regained its foothold. However, if its stock were to again trade below the value of the assets it owns, issuing new shares will become harder and less effective.
As leverage continues to dry up and equity dilution becomes less sustainable, MicroStrategy may face a moment where it cannot raise enough capital to continue its accumulation model.
