MicroStrategy (MSTR) shares fell below $300 during after-hours trading on Monday, down 46% from their all-time high in November. The decline follows the company’s proposal to increase its stock shares by billions to support its $42 billion funding strategy amid concerns.
According to Google Finance data, MicroStrategy's stock closed down 8.2% on Monday at $302.96, marking the lowest closing price since Nov. 8. The stock then further fell 3% to $293.59 in extended-hours trading.
For the majority of this year, MicroStrategy’s stock has shown significant growth, gaining 342% year-to-date. This coincided with its aggressive bitcoin accumulation strategy during a period when the cryptocurrency's price rose by 121% annually.
MicroStrategy’s latest bitcoin purchase occurred last week when it acquired 2,138 BTC, bringing its total holdings to 446,400 BTC. The stock was also included in the tech-heavy Nasdaq 100 index on Dec. 23.
Despite the additional bitcoin buying and the Nasdaq inclusion, MSTR has been in decline since hitting an intraday high of $543 on Nov. 21.
Nick Ruck, director of LVRG Research, pointed out that investors might have started to view MSTR as too risky, given the company's use of increased debt and equity to purchase bitcoin. MicroStrategy primarily funds its bitcoin acquisitions by issuing convertible notes and bonds to investors.
“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,” Ruck said. “This places MSTR in dangerous territory, as bitcoin has already seen an enormous increase in the past few months while the U.S. struggles to keep inflation under control with an uncertain economic future as the new White House administration is set to soon take over.”
In October, the company announced its "21/21" strategy, as its plan to raise $42 billion over the next three years. MicroStrategy seeks to raise $21 billion through the issuance of new equity and the other half through the issuance of fixed-income securities in order to back its bitcoin purchases.
In support of the strategy, the company made a proposal earlier this month that seeks to increase Class A common shares by 10 billion and preferred shares by one billion.
The Kobeissi Letter wrote in an X post on Monday that the proposed plan of share increase puts MicroStrategy in a “lose-lose” situation.
“If the plan is approved, bears will say that this is a highly dilutive move for existing shareholders,” the Kobeissi Letter said. “However, if it is not approved, then MicroStrategy will be unable to continue buying bitcoin on leverage.”
The proposal will be put to a shareholder vote in the near future, where MicroStrategy co-founder Michael Saylor holds 46.8% of the voting power, according to Kobeissi. Such concerns, coupled with bitcoin’s most recent dip to $92,241, might have worsened MicroStrategy’s stock price decline.
On the other hand, Felix Hartmann, founder of Hartmann Capital, wrote on X that MicroStrategy’s debt, being near 0% interest and maturities spread between 2027 and 2030, will not become a near-term issue.
“Every BTC dip brings doomsayers; every pump resets the MSTR premium and makes Saylor look like a genius,” said Hartmann, who also predicted that MicroStrategy would “eventually implode,” but not before becoming a top-five company by market capitalization.
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