MicroStrategy Increases Bitcoin Holdings Despite Shareholder Worries

MicroStrategy has revealed that it has invested nearly $1 billion to acquire an additional 10,624 BTC, bringing its total Bitcoin reserve to 660,624 BTC.

Key Takeaways

MicroStrategy purchased an additional 10,624 BTC for nearly $1 billion, bringing its total to 660,624 BTC.
The company is under increasing scrutiny amid declining Bitcoin prices and market challenges.
Shareholder dilution is a concern as MicroStrategy shifts from preferred stock sales to issuing regular shares.
A dip in market valuation has raised questions about the sustainability of its funding model amidst ongoing volatility.

This announcement comes as scrutiny increases on MicroStrategy's chairman, Michael Saylor, especially amidst the broader market downturn stemming from Bitcoin’s declining price.

Ongoing Accumulation Amidst Increasing Pressures

Despite ongoing public criticism regarding its strategies, Saylor has persisted in expanding MicroStrategy’s Bitcoin assets. Over the last two months, Bitcoin's price has seen a decline, failing to regain the $100,000 mark it lost in November, and is currently trading around $89,950.

MicroStrategy has transitioned into a Bitcoin-centered treasury rather than a conventional software firm, facing challenges as its valuation closely mirrors Bitcoin's price volatility. Yet, the company continues to make new acquisitions. Interestingly, it refrained from buying during a recent dip to $86,000, instead announcing its latest purchase when Bitcoin briefly rose to $90,615.

Some analysts perceive this move as an effort to energize and maintain the morale of loyal investors. However, concerns are rising regarding MicroStrategy's capacity to fund future Bitcoin acquisitions.

Analyst Novacula Occami pointed out that for the most recent purchase, MicroStrategy managed to sell only $44 million in preferred stock last week—a significantly smaller amount compared to previous capital raises. This downturn suggests the market is becoming less inclined to lend or invest in their preferred equity.

As obtaining leverage grows more challenging, MicroStrategy is returning to issuing regular shares, selling 5.1 million MSTR shares at $181 each. Unfortunately, this action further dilutes the stakes of existing shareholders. Under current conditions, this strategy may become unsustainable.

(Source: Saylor Tracker)

Stock Price Weakness Puts Funding Model at Risk

MicroStrategy faced a sharp decline in early December when its market capitalization momentarily dropped below the net value of its Bitcoin holdings. This incident raised fresh concerns related to leverage, liquidity, and investor confidence overall.

The company's share price fell to $156, lowering its market valuation to $45 billion, while the value of MicroStrategy’s Bitcoin assets was approximately $55.2 billion. This scenario was notable, as it marked a period where the market was valuing the company below its actual asset worth.

While MicroStrategy appears to have regained some stability, should its stock once again trade beneath the value of its assets, the ability to issue new shares would diminish in effectiveness.

As leverage becomes scarcer and the feasibility of equity dilution is jeopardized, MicroStrategy might soon encounter challenges in raising sufficient capital to sustain its Bitcoin accumulation strategy.