In the world of corporate Bitcoin adoption, software firm MicroStrategy has become the poster child for companies holding BTC on their balance sheets. Led by vocal Bitcoin bull Michael Saylor, MicroStrategy has amassed over 130,000 BTC since August 2020, equivalent to over 2% of the leading cryptocurrency’s circulating supply. While this bold strategy has paid off handsomely so far, with the company sitting on billions in unrealized profits, cracks are starting to show as its stock reels from Bitcoin’s recent volatility.
MicroStrategy’s Insatiable Bitcoin Appetite
What started as a $250 million Bitcoin purchase in August 2020 has snowballed into a nearly $4 billion BTC position for MicroStrategy. The company has consistently added to its Bitcoin holdings every few months, often financing the purchases through convertible note offerings. This aggressive accumulation has transformed MicroStrategy into a de facto Bitcoin ETF, with its stock becoming a proxy for the cryptocurrency.
We’re not sellers. We’re only acquiring and holding Bitcoin
– Michael Saylor, CEO of MicroStrategy
Bitcoin Bet Pays Off Big
MicroStrategy’s Bitcoin gambit has been incredibly lucrative so far. The value of its BTC holdings has soared from $250 million to nearly $6 billion at Bitcoin’s peak, generating a staggering return of over 2300% for the company. This success has sent its stock price skyrocketing, with MSTR shares up over 1100% in 2024 alone.
- MicroStrategy holds over 130,000 BTC, 2% of supply
- BTC position has generated over 2300% return
- MSTR stock up 1100% in 2024 on Bitcoin gains
Cracks Emerging in MSTR’s Bitcoin Facade
However, MicroStrategy’s fairy tale Bitcoin run is starting to lose some of its luster. On November 21, the company announced plans to sell $2.6 billion in convertible notes to fund even more Bitcoin purchases. It also unveiled a whopping $42 billion Bitcoin acquisition program. While this initially ignited another surge in its stock price to an all-time high above $543, the euphoria quickly faded as investors began to question the prudence of MicroStrategy’s increasingly leveraged bets on the volatile cryptocurrency.
Markets seem concerned about the potential approval of an increase in the authorized share count from 10 million to a staggering 10.33 BILLION if the plan is approved…The issue is this puts the company in a lose-lose situation now.
– Kobeissi Letter, investment analysis firm
From Bull to Bear for MSTR?
Since announcing its debt offering and share authorization plans on November 21, MicroStrategy’s stock has plunged by over 46%. While still up massively from its pre-Bitcoin levels, concerns are mounting that the company’s BTC binge may be approaching unsustainable levels. By continually doubling down on Bitcoin with borrowed money, MicroStrategy is taking on significant risks that could backfire spectacularly if the cryptocurrency market turns bearish.
MicroStrategy’s stock has plummeted 46% since November 21 on concerns over its aggressive Bitcoin buying and share authorization plans
Saylor’s Folly or Genius Move?
Ultimately, the wisdom of MicroStrategy’s extreme Bitcoin strategy will depend on the cryptocurrency’s long-term performance. If Bitcoin continues its upward trajectory and establishes itself as a legitimate asset class and store of value, Saylor and MicroStrategy will look like geniuses. However, if the skeptics are right and Bitcoin proves to be a passing fad or massive bubble, the company could face catastrophic losses on its leveraged bets.
Convertible Notes
A type of debt that can be converted into shares of the issuing company’s stock at a predetermined price. MicroStrategy has used convertible notes to finance its Bitcoin purchases.
Key Takeaways
- MicroStrategy holds 2% of Bitcoin’s circulating supply
- Bitcoin bet has driven 1100%+ gains in MSTR stock
- Concerns rising over leveraged and aggressive Bitcoin buying
- Stock down 46% since mid-November on Bitcoin doubts
- Long-term success depends on Bitcoin becoming established asset class
