MicroStrategy witnessed massive growth in 2024 with its heavy Bitcoin acquisition strategy while accumulating 446,400 BTC through a series of convertible notes and debt issuance. The MSTR stock ended the year with 332% gains outperforming Bitcoin’s 118% gains in 2024. As the firm plans to issue a massive 10 billion in equity, market analysts are weighing how it would impact the stock price amid a massive supply surge.
MicroStrategy And Its Plans to Issue 10 Billion MSTR Stock
As said, MicroStrategy outperformed Bitcoin in 2024 by a margin of 3x, however, the MSTR stock witnessed strong selling pressure throughout December last month. From its all-time high of $473 in November 2024, the company’s stock has corrected 40% so far ending 2024 under $300 levels.
This hasn’t stopped the business intelligence firm from buying more Bitcoins. Earlier this week, the company announced its final Bitcoin purchase of 2,138 BTC, worth $209 million, for the year 2024.
Now that the company plans for equity dilution from 330 million to 10 billion, analysts are skeptical as to what will happen to the MSTR stock price moving into 2025. To approve this equity dilution, Michael Saylor has proposed a MicroStrategy shareholders vote for the equity dilution. MicroStrategy’s business model revolves around an aggressive Bitcoin acquisition strategy:
- Borrow at low interest rates: Using 0% convertible notes to raise capital.
- Buy Bitcoin: Driving its price higher.
- Sell new shares at a premium: Raising funds to purchase even more Bitcoin.
- Repeat the cycle.
This approach has made Bitcoin integral to MicroStrategy’s operations. However, the proposed share count increase highlights a critical tension. Some critics argue that the move could dilute existing shareholders, reducing their value per share. On the other hand, if the shareholders reject the proposal, the firm would lose its ability to buy Bitcoin on leverage, undermining its core strategy. This puts the company in a “lose-lose” position.
Despite concerns, the odds of the proposal passing appear high. Michael Saylor himself controls 46.8% of the voting power. With support from just 4% of remaining shareholders, the measure could gain approval. Markets are pricing this likelihood into the stock’s current performance.
Analysts Take on the Stock Performance
Commenting on the recent MSTR stock decline, Sino G., Co-Founder and COO at 21st Capital, pointed to the company’s Market Net Asset Value (mNAV), which is highly sensitive to Bitcoin’s sentiment and price momentum.
MicroStrategy stock is known to outperform during Bitcoin bull runs due to its aggressive Bitcoin acquisition strategy. However, this sensitivity works both ways, explains Sino G. He wrote:
- In bullish markets: mNAV expands, amplifying stock gains.
- In bearish or sideways markets: mNAV contracts, leading to sharper declines in $MSTR.
Recent stagnation in Bitcoin’s price has dampened upside momentum, leading to a contraction in mNAV and a subsequent pullback in MSTR stock price.
Some investors had hoped MSTR could decouple from Bitcoin’s bearish phases, believing its strategy had evolved to mitigate downside risks. However, Sino G warns that this optimism is misplaced. He wrote:
“MicroStrategy is not immune to Bitcoin downturns. The stock remains highly correlated with Bitcoin sentiment, and sideways or bearish trends in the cryptocurrency will likely result in mNAV contractions.”
Investors might want to approach MSTR bets with caution and without falling into the FOMO trap. As Bitcoin continues its uncertain trajectory, MSTR’s performance will remain closely tied to the cryptocurrency’s market sentiment.
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