MicroStrategy's stock (MSTR) experienced a sharp decline, closing at $302.96 on Monday, down 8.2%, before dropping further to $293.59 during after-hours trading.
MicroStrategy's stock (MSTR) experienced a sharp decline, closing at $302.96 on Monday, down 8.2%, before dropping further to $293.59 during after-hours trading. This marks a 46% decrease from the company's all-time high of $543 in November.
The decline follows the company's announcement of a proposal to increase its stock shares significantly, raising concerns among investors regarding its aggressive Bitcoin acquisition strategy.
The company's stock has shown a remarkable year-to-date gain of 342%, coinciding with a 121% increase in Bitcoin's price. MicroStrategy recently purchased an additional 2,138 BTC, bringing its total holdings to 446,400 BTC. However, the strategy to finance these purchases through debt and equity has raised alarms.
Analysts are worried that this approach could dilute existing shareholders, with the company primarily funding its Bitcoin investments through convertible notes and bonds.
Nick Ruck, director of LVRG Research, highlighted the growing perception of MSTR as a risky investment. He noted that if the company does not continue its Bitcoin purchases, it might signal stagnation in its core value proposition.
The proposed share increase aims to support a broader $42 billion funding strategy over the next three years. Plans include raising $21 billion through equity and the same amount through fixed-income securities.
The Kobeissi Letter commented that the proposed share increase places MicroStrategy in a precarious position. Approval could lead to significant shareholder dilution, while rejection might hinder the company’s ability to leverage Bitcoin purchases.
A shareholder vote on the proposal is forthcoming, with co-founder Michael Saylor holding 46.8% of the voting power.
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