MicroStrategy Shares Drop 8% Following Year-End Bitcoin Purchase

The purchase was made just an hour before the Nasdaq stock exchange opened at 2:30 PM UTC. Within the first hour of trading, MSTR shares fell 5.3%, dropping from $318.89 to $302.09. Despite a partial recovery during the session, the stock closed at $302.96. However, it declined by an additional 3.19% in after-hours trading, bringing the price down to $293.59, as per Google Finance data.

According to a filing, MicroStrategy financed the acquisition by selling 592,987 shares during the same week. This marks the eighth consecutive week of Bitcoin purchases by the business intelligence firm, adding a total of 194,180 BTC to its holdings since October 31.

The Kobeissi Letter highlighted in a December 30 post on X (formerly Twitter) that the market is wary of MicroStrategy’s proposal to increase authorized shares by 10 billion. The report noted that the company has heavily leveraged itself through convertible notes and debt issuances. To sustain its Bitcoin acquisition strategy, it would need to issue additional debt or equity.

If approved, the total authorized shares could increase from 330 million to 10.33 billion. Kobeissi described the situation as a "lose-lose" scenario, attributing the recent 20.2% decline in MSTR’s stock price over the past 30 days to these concerns, although the stock has surged 342.2% since January 1.

Felix Hartmann, founder of Hartmann Capital, suggested in a December 30 post that while MicroStrategy's stock might eventually collapse, many shorts could mistime their bets and suffer losses. He speculated that the company could become one of the top five by market cap within five years before potentially facing bankruptcy. Alternatively, in a bullish market, Hartmann noted that MicroStrategy might significantly increase leverage, making its debt obligations manageable when Bitcoin holdings surge in value.

Joe Burnett, Head of Market Research at Unchained, referred to MicroStrategy’s approach as “hyperbitcoinization.” He explained that the company leverages its stock trading at a premium to issue new shares, buy more Bitcoin, and reduce leverage, thereby increasing Bitcoin holdings per share in a cyclical process.

On December 23, MicroStrategy was added to the Nasdaq-100 index, joining the ranks of Nasdaq’s 100 largest companies by market capitalization. Alongside MicroStrategy, Palantir Technologies (PLTR) and Axon Enterprise (AXON) were also added to the index, as stated in a December 13 announcement by Nasdaq.