MicroStrategy’s stock dips under $300 as funding raises eyebrows

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As a seasoned researcher with over two decades of experience in the financial markets, I have witnessed countless ups and downs, bubbles and crashes, and everything in between. The recent decline of MicroStrategy (MSTR) shares has certainly caught my attention, especially given its aggressive Bitcoin accumulation strategy.

The drop in MSTR’s stock price to less than $300 is concerning, but it is essential to consider the broader context. The firm reported a 342% growth for the year due to its Bitcoin strategy, which also saw a 121% surge in the price of Bitcoin itself. However, the recent criticism from figures like Martin Shkreli and Jacob King, as well as concerns over the potential approval of raising authorized share count by 10 billion, cannot be ignored.

The debate around MSTR’s approach reminds me of the age-old argument between bulls and bears. Some believe in the potential long-term growth of Bitcoin and MSTR, while others see it as a bubble waiting to burst. As a researcher, I always advise investors to consider multiple perspectives before making decisions.

To add a bit of humor, let me quote a famous line from the movie “The Wolf of Wall Street”: “I’m not fucking leaving!” This could be interpreted as MicroStrategy’s CEO Michael Saylor’s stance on Bitcoin and MSTR, but investors should remember that it is essential to have an exit strategy in place, no matter how bullish one may be.

In an after-hours trading session on December 30, MicroStrategy’s stock dipped below $300, leading some to wonder if the company’s momentum might be waning.

The MicroStrategy stock (MSTR) has dropped approximately 46% since its peak in November. This decline is associated with the company’s attempt to acquire billions of dollars worth of additional shares, which forms part of its $42 billion financing plan.

Based on Google Finance data, the company’s shares experienced a two-day decline, with the share price dropping significantly to $302.96 – a decrease of 8.2%. After-hours trading saw an additional drop in stock value by about 3%, bringing the new price down to $293.59.

Over the past week, Mastercard (MSTR) obtained 2138 Bitcoins, boosting their total holdings to a substantial 446,400 Bitcoins. Moreover, on December 23rd, MSTR’s shares were incorporated into the Nasdaq 100 index, following which there was a significant surge in its share price by an impressive 402%.

Since hitting an intraday peak at $543 on November 21, MicroStrategy (MSTR) has been trending downward. Yet, this decline doesn’t diminish the importance of the impressive 342% growth reported by the company for the year to date, a result of their aggressive Bitcoin (BTC) accumulation strategy that coincides with the 121% surge in Bitcoin’s price.

Is MicroStrategy losing its momentum? 

Martin Shkreli, a co-founder of Elea Capital hedge funds, has criticized Michael Saylor and MSTR’s approach to accumulating Bitcoin. He labeled Saylor as overly enthusiastic and not trustworthy in his support for BTC. Referring to the 0.5% support MSTR received in their shareholder vote on Bitcoin treasury allocation held on Dec. 24, Shkreli called it “the worst vote I’ve ever seen.” He further stated that market sentiment has shifted and it’s becoming challenging to envision a strong argument for the rise in BTC prices, suggesting that Saylor’s massive, multibillion-dollar Bitcoin purchases have not yielded the desired results.

It seems that markets are expressing apprehension about the possible approval of increasing the authorized share count to 10 billion.

If this increase gets approved, the total shares would skyrocket from 330 million to an astonishing 10.33 billion.

However, this decision has put the company in a predicament where it’s currently facing unfavorable outcomes (the “lose-lose” situation).

— The Kobeissi Letter (@KobeissiLetter) December 30, 2024

On prior occasions, the company has encountered scrutiny. Some financial experts, such as Kobbeissi Letter and Jacob King, argue that MicroStrategy’s business model resembles a Ponzi scheme, given its heavy reliance on borrowing and selling new shares to acquire Bitcoin, which potentially devalues shareholders’ holdings.

A severe drop in Bitcoin prices is likely on the horizon. When values begin plummeting like a falling stone, remember that we’ve given you fair warning. This recent surge has been driven by manipulation and deception, and just as swiftly as it climbed, it could collapse. If you’re heavily invested in cryptocurrency, now might be the ideal moment to cash out—before it’s too late.

— Jacob King (@JacobKinge) December 31, 2024

Based on my extensive experience in the financial markets and my keen interest in Bitcoin and MicroStrategy (MSTR), I have a strong feeling that the company will face significant challenges down the line, leading to an eventual implosion. However, it’s crucial to note that much of MSTR’s debt is at near-zero interest rates with maturities extending from 2027 to 2030, which means servicing and repayment are not immediate concerns.

The real challenge lies in the bet against Bitcoin, where many shorts may find themselves in a precarious position. The unpredictable nature of the cryptocurrency market makes it difficult for these investors to accurately predict when to cover their short positions, potentially leading to substantial losses. In my opinion, this could be disastrous for those betting against Bitcoin and MSTR, given the company’s significant investment in the digital currency.

In conclusion, while I believe that MSTR may eventually face difficulties, it is essential to consider the extended maturities of its debt and the unpredictable nature of Bitcoin before making investment decisions regarding shorting the stock or cryptocurrency.

— Felix Hartmann (@FelixOHartmann) December 30, 2024

Hartmann Capital’s Felix Hartmann expresses a positive outlook, stating that MicroStrategy’s short-term debt obligations are manageable due to low interest rates and strategic maturities ranging from 2027 to 2030. Hartmann further comments that every dip in Bitcoin is met with skepticism, while each price surge reinforces the value of MicroStrategy shares (MSTR), making Saylor appear prescient. He predicts that MSTR could reach a market value of five before experiencing a decline, as they pursue their ambitious ‘Bitcoin 21/21’ goal. There is ongoing debate among investors regarding how the shareholder vote will guide MSTR towards this ambitious target, especially as the company moves into its next development phase.

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2024-12-31 13:04