Historically, MicroStrategy stock and the price of Bitcoin have had a close relationship with the company becoming the largest investor in BTC.
MicroStrategy shares are down 21% in the past 30 days, while Bitcoin shares are down (Bitcoin) by less than 2%. This represents a significant difference, as MSTR stock typically moves in tandem with Bitcoin.
The stock is up more than 320% this year, while Bitcoin has jumped 120%. Its outperformance over Bitcoin, coupled with its lack of expense ratio, has led some investors to view it as a better alternative to Bitcoin and Bitcoin ETFs.
MSTR continued to Collecting Bitcoins This year and currently holds 446,400 coins worth over $42 billion. This number is much lower than the company's market value, which is more than $65 billion.
The main reason for the current difference between Bitcoin and MicroStrategy stocks is because the company announced plans to do so Issuing 10 billion shares To finance new Bitcoin purchases. Its medium-term goal is Raised $42 billion Through equity and fixed income between 2025 and 2027.
according to Yahoo FinanceThe company has 225 million shares outstanding, which means that the number of shares will increase by more than 4,344%. Raising capital by issuing shares dilutes existing shareholders, reducing their ownership in the company. For a for-profit company, this also reduces earnings per share.
In a detailed X thread, Al Qubaisi’s letter explained the predicament facing the company. Raising more shares would dilute existing shareholders, but if the share relicensing fails, MicroStrategy will lack the funds to continue its Bitcoin acquisition strategy.
Despite these challenges, there is a strong possibility that MicroStrategy shareholders will approve the share increase. Michael Saylor, one of the plan's main advocates, owns 46.8% of the outstanding shares. Saylor is well-respected by shareholders, who have seen shares rise nearly 2,000% in the past five years.
Microstrategy stock valuation reset
Additionally, the decline in MicroStrategy shares may reflect the market adjusting its valuation premium, as the company is viewed as highly overvalued by some. Specifically, MicroStrategy's stock is worth $65 billion, which far exceeds the value of its $42 billion Bitcoin holdings.
This valuation suggests that its core technology business is worth about $23 billion, which is unlikely. The latest results showed that its software business generated sales of $129 million during the third quarter and posted a net loss of $8.4 million.
The future outlook for MicroStrategy stock in 2025 will depend largely on the performance of Bitcoin. A rebound to a new all-time high for Bitcoin could bring more gains to MSTR stock as investors take advantage of the decline.
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