The share price of American business intelligence firm MicroStrategy (NASDAQ: MSTR) is on a downward spiral as the company continues its aggressive Bitcoin (BTC) buying strategy.
At the close of the last trading session, MSTR’s stock price was valued at $302.96, ending the day down over 8%.
This decline extended losses seen on the weekly timeframe, with the equity plunging 15%. However, MSTR remains one of the best-performing stocks of 2024, rallying 342% year-to-date.
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Ahead of trading on the year’s final day, MSTR’s share price is up almost 3%, showing signs of recovery.
Why MSTR stock is down
This plunge follows MicroStrategy’s latest Bitcoin acquisition of 2,138 BTC for $209 million at an average price of $97,837 per Bitcoin. The company holds a total of 446,400 BTC, acquired for $27.9 billion at an average price of $62,428 per Bitcoin.
While partly aligned with general market momentum, the stock’s ongoing short-term correction can be attributed to the company’s Bitcoin strategy.
In this case, according to financial analysis platform The Kobeissi Letter in a December 30 X post, the market appears uneasy with MicroStrategy’s proposal to dramatically increase its authorized share count—from the current 330 million shares to a staggering 10.33 billion.
If approved, this move would represent a significant shift in the company’s capital structure. It would enable continued Bitcoin acquisitions but dilute existing shareholders. Conversely, rejection of the proposal would limit the company’s ability to grow its Bitcoin holdings, a key component of its strategy.
Amid this dilemma, The Kobeissi Letter observed that over the past month, MSTR shares have dropped nearly 50%, diverging sharply from Bitcoin’s modest 2% gain, as investors question the sustainability of MicroStrategy’s leveraged Bitcoin-centric model.
MSTR stock’s optimistic and cautious outlook
On the other hand, Felix Hartmann, founder of Hartmann Capital, expressed an optimistic yet cautious outlook in a December 30 X post. He projected that MicroStrategy stock could rise to become one of the world’s top companies by market cap before collapsing.
“Within 5 years, MSTR will first become a top 5 company by market cap before eventually going bankrupt. We’re still early,” he warned.
Hartmann cited several factors supporting the company’s near-term resilience. Much of MicroStrategy’s debt carries near-zero interest rates and matures between 2027 and 2030, minimizing immediate repayment pressures. Furthermore, while slowing Bitcoin purchases could unsettle markets, the company is unlikely to sell its holdings before 2025.
He also emphasized Bitcoin’s inherent volatility, which creates cycles of skepticism during price dips and renewed confidence during rallies, ultimately boosting MicroStrategy’s valuation. However, he believes long-term challenges, such as maturing debt and unrealized losses on Bitcoin investments, will eventually undermine the company.
Criticisms of MicroStrategy’s Bitcoin plan
MicroStrategy’s Bitcoin strategy, spearheaded by executive chairman Michael Saylor, has drawn praise and criticism. For example, American economist Peter Schiff has accused Saylor of gambling with investors’ money through the Bitcoin accumulation plan, warning that the firm is likely to dispose of its BTC holdings once the asset’s price plummets.
Additionally, celebrity investor and author Robert Kiyosaki praised Saylor’s strategy as “genius,” commending the executive for creating wealth for MSTR investors.
In conclusion, it remains to be seen how the Bitcoin strategy plays amid the mounting concerns despite MicroStrategy yielding significant gains.
Featured image via Shutterstock
