Key Takeaways
- MicroStrategy's stock dropped 46% from November highs.
- The company plans to raise $42 billion for bitcoin purchases.
- Investors express concerns over debt and share dilution risks.
MicroStrategy’s stock price dipped below $300 during after-hours trading on Monday, marking a 46% decline from its November peak of $543.
The company’s shares closed at $302.96, down 8.2% for the day, before sliding further to $293.59 in extended-hours trading.
The decline follows the company’s proposal to significantly increase its stock shares to support a $42 billion funding strategy.
MicroStrategy plans to raise $21 billion through new equity issuance and an additional $21 billion via fixed-income securities to fund its bitcoin acquisitions.
Concerns over debt and share dilution
MicroStrategy’s strategy has fueled concerns among investors about the risks of leveraging debt and equity for bitcoin purchases.
Nick Ruck of LVRG Research noted:
Existing shareholders are diluted when the company buys more BTC, but if it doesn’t, it may signal the company has stalled on a major part of its value proposition.
This year, MicroStrategy’s stock has gained 342%, driven by its aggressive bitcoin accumulation and a 121% annual increase in bitcoin’s price.
However, the company’s latest bitcoin acquisition of 2,138 BTC, bringing its holdings to 446,400 BTC, hasn’t offset investor unease.
Mixed outlook
Investor opinions remain divided. Felix Hartmann of Hartmann Capital highlighted that the company’s near-zero-interest debt maturities are spread until 2030, which could buffer short-term risks.
Yet, he predicted MicroStrategy might “eventually implode,” albeit after potentially becoming a top-five company by market cap.
