After announcing the purchase of $209 million in Bitcoin last night, MicroStrategy's stock price (MSTR) caused considerable fluctuations in the market, closing down more than 8% on the day, showing investors' concerns about its highly leveraged Bitcoin investment strategy. . MicroStrategy funded the purchase this week by selling 592,987 shares, according to official filings.
MicroStrategy shares fall below $300
MicroStrategy announced this latest Bitcoin purchase just an hour before the Nasdaq exchange opened. However, within just one hour of the day's opening, MSTR shares fell from an opening price of $318.89 to $302.09.
Despite an intraday recovery, the final closing price remained at $302.96. The price fell further in after-hours trading, pushing the stock price as low as $293.7 at the time of writing. It's down 46% from its November high.
Eight consecutive weeks of big Bitcoin buying
The purchase marks MicroStrategy’s eighth consecutive week of Bitcoin purchases. The company has continued to increase its holdings every week since November 11, 2024, and has accumulated a total of 194,180 Bitcoins so far.
However, it is also clear from the records that despite the drop in Bitcoin prices, the company’s Bitcoin buying volume in the past two weeks has declined significantly compared to previous weeks.
Market worries about leverage risks
According to analysis by Kobeissi Letter on the X platform on December 30, the market is concerned about MicroStrategy’s plan to increase the number of shares authorized to be issued to 10 billion shares.
Kobeissi Letter pointed out that MicroStrategy leverages convertible bonds and issuance of new debt, and needs to issue further debt or equity to support its continued Bitcoin buying strategy. They warned:
"If approved, the total share count of MicroStrategy will surge from the current 330 million shares to 10.33 billion shares. This puts the company in a lose-lose situation that will be difficult to escape in the short term."
Although MicroStrategy's shares are down 20.18% over the past 30 days, shares are still up 342.15% since January 1, 2023.
Hyper Bitcoinization
Felix Hartmann, founder of Hartmann Capital, said in an X post on December 30:
“MicroStrategy stock prices may eventually collapse, but most short sellers will suffer losses due to bad timing, especially against Bitcoin and MSTR.”
He further stated:
"In the next five years, MicroStrategy may first become one of the top five companies in the world by market capitalization and then go bankrupt. However, there is another possibility: During the bull market, the company will be able to further leverage and easily repay the debts from 2027 to 2027. With $1 billion to $4 billion of debt maturing in 2029, the value of its Bitcoin holdings may reach $300 billion.”
Joe Burnett, director of market research at Unchained, calls MicroStrategy’s strategy “Hyperbitcoinization.” He explained:
“By issuing shares at a premium, micro-strategies are able to raise capital at a price above net asset value (NAV) to purchase further Bitcoin and reduce leverage, thereby increasing Bitcoin holdings per share. This process will continue cycle."
Plans to build smarter leverage
According to previous reports by Zombit, MicroStrategy founder Michael Saylor said in an interview with Bloomberg TV that the company plans to focus more on fixed income securities such as convertible bonds in the first quarter of 2025, because Michael Saylor warned that MicroStrategy Too conservative in the use of company funds and more leverage is needed to support growth strategies.
"We will review our capital plan and develop a new plan based on prevailing market conditions."
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