MicroStrategy (MSTR) Faces Second-Worst Month Since Investing in Bitcoin

Summary:
MicroStrategy (MSTR), a company known for its significant investments in Bitcoin, is experiencing a challenging financial streak. Since July, the company's stock has reported five consecutive months of negative returns, with November shaping up to be particularly difficult. Investors are showing increasing caution in the current market environment, especially with the Federal Reserve's uncertain policy impacts.

Key Takeaways

MicroStrategy (MSTR) has reported negative returns for five consecutive months.
November 2023 is shaping up to be the second-worst month since the company began its Bitcoin investment strategy.
The company is projected to have a 37% decline in November, marking its largest drawdown so far this year.
The premium of MSTR stock over its Bitcoin holdings has significantly decreased, making equity capital more challenging to secure.
A market shift away from tech and growth stocks has put pressure on MSTR and similar investments.

MicroStrategy (MSTR) has struggled significantly lately, posting negative returns for five months in a row since July. This unfavorable trend started with a mild 1% loss in August but has intensified, and currently, November is proving to be the second-worst month for the company since it began its Bitcoin investment strategy in August 2020.

In November, MicroStrategy is expected to face the most substantial decline of the year, with a staggering 37% drop. This would be a significant loss since revealing its initial Bitcoin purchase. The company's stock has historically traded at a premium compared to the net asset value (NAV) of its Bitcoin holdings. However, that premium has significantly narrowed, indicating that investors are now less inclined to pay extra for MSTR stock versus directly owning Bitcoin.

With the shrinking NAV premium, it has become increasingly difficult for MicroStrategy to raise capital through equity. Additionally, there has been a broader market shift throughout November, with technology and growth stocks, particularly those related to AI, remaining under pressure. Investors are generally becoming more risk-averse, which especially impacts MicroStrategy in these risk-off environments.

The uncertainty surrounding the Federal Reserve's monetary policy is also affecting risk assets, as Bitcoin prices have dipped below the crucial $80,000 mark. Currently, MicroStrategy's purchasing price stands at around $74,433, aligning closely with Bitcoin's trading value. This current market climate presents an ongoing challenge for MicroStrategy, putting its future investments at risk.

MicroStrategy (MSTR) Faces Second-Worst Month Since Investing in Bitcoin