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Is MicroStrategy Being Punished For This Seemingly Smart Bitcoin Move?
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Bitcoin-buying machine MicroStrategy (NASDAQ:MSTR) is having a tough end to the year. After rallying 464% through the middle of November, the stock has lost 44% of its value. However, MSTR shares are still up nearly fivefold in 2024.
The rise has been fueled by CEO Michael Saylor buying fistfuls of Bitcoin (CRYPTO:BTC). As of Dec. 30, MicroStrategy owned 446,400 bitcoins, a 136% increase over the 189,150 bitcoins it owned at the end of last year.
Over that period, the cryptocurrency’s price has more than doubled in value. Yet where MSTR stock plunged hard since its high point, Bitcoin is up 8%. So, although MicroStrategy has ridden the Bitcoin wave to massive gains, their prices don’t march lockstep.
And now the nominal data analytics company is being criticized for its most recent purchases. It doesn’t seem to make sense.
24/7 Wall St. Key Points:
- MicroStrategy (MSTR) has bought bitcoins now for eight straight weeks and now owns over 446,000 bitcoins.
- While CEO Saylor wants to increase MSTR’s debt and massively dilute shareholders to buy even more, that’s not what some people are getting upset about.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Bitcoin before all else
Although MicroStrategy’s legacy business continues, it is a poor performer with falling sales and mounting losses. That doesn’t much matter to Saylor, who is hyperfocused on the cryptocurrency and turning his company into what he calls a Bitcoin Treasury Company.
To do so, Saylor announced in October his 21/21 Plan, a three-year, $42 billion bitcoin buying program. The money would be evenly split with $21 billion coming from equity capital and the other $21 billion coming from fixed-income instruments such as debt, convertible notes, and preferred stock.
He is both massively leveraging MicroStrategy to make the purchases, but also willing to drastically dilute existing shareholders to achieve his goal.
Last week Saylor unveiled a stock issuance program on steroids. The CEO wants to take MicroStrategy’s Class A shares from 330 million to 10.3 billion, a 51-fold increase. In the process, he wants to lower MSTR’s “Bitcoin yield,” or the number of bitcoins owned per share, from its current level of 17.8% down to 6% to 10% between 2025 and 2027.
Yet criticisms are starting to mount. Not necessarily because of the doubling of debt between 2023 and the end of October, or the drastic dilutive effects of his 21/21 Plan. Rather, it’s that Saylor, who just purchased 2,138 bitcoins for $209 million in cash, at an average price of $97,837 per bitcoin, isn’t buying enough of the cryptocurrency.
On a buying binge
Last week marked the eighth consecutive week Saylor bought Bitcoin. Yet the number of bitcoins purchased was the smallest number he had to date.
| Date | Bitcoin Purchased | Average Price | Total Spent | Total Bitcoin Owned |
| December 30 | 2,138 | $97,837 | $209 million | 446,400 |
| December 23 | 5,262 | $106,662 | $561 million | 444,262 |
| December 16 | 15,350 | $100,386 | $1.5 billion | 439,000 |
| December 9 | 21,550 | $98,783 | $2.1 billion | 423,650 |
| December 2 | 15,400 | $95,976 | $1.5 billion | 402,100 |
| November 25 | 55,500 | $97,862 | $5.4 billion | 386,700 |
| November 18 | 51,780 | $88,627 | $4.6 billion | 331,200 |
| November 12 | 27,200 | $74,463 | $2.03 billion | 279,420 |
Source: MicroStrategy 8-K SEC filings.
It would seem to be a smart move by Saylor. Not that I’m on board with what he’s trying to achieve here as a major correction in Bitcoin pricing could hurt not only MSTR stock, but severely impair the company’s financial position.
However, as the price of Bitcoin has soared, you would want Saylor to buy less in a sort of dollar cost averaging strategy. Buy more at lower prices and less at higher levels to get the biggest bang for your buck.
Now a good argument can be made that Saylor had bought over 55,000 bitcoins when the price was at a similar level as this past week. And considering the billions he’s spent at all different times, I don’t think Saylor has any sort of bitcoin buying optimization plan in place. Still, it seems like a smart move.
Key takeaway
Arguably, Saylor thinks Bitcoin’s price is peaking and is due for a correction. He wants to continue acquiring more, but isn’t willing to spend billions if it falls. Alternatively, he is running out of cash to make the purchases, which is why he’s trying to dilute the heck out of shareholders.
Either way, it’s not wrong of him to limit the number of bitcoins he’s buying, even if the overall purpose could lead to serious repercussions for MicroStrategy shareholders.
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