MicroStrategy announced today that it has spent nearly $1 billion to acquire another 10,624 BTC, bringing its total Bitcoin holdings to 660,624 BTC.
The purchase comes at a time of increased attention on MicroStrategy's figurehead, Michael Saylor. The company has faced significant pressure during a broader market downturn driven by weak Bitcoin price performance.
Accumulation continues as pressure mounts
Saylor has continued to expand MicroStrategy’s Bitcoin holdings despite ongoing public criticism of the company's approach.
The Bitcoin price has weakened over the past two months, failing to regain the $100,000 it lost in November and currently trading around $89,950.
MicroStrategy, now effectively a Bitcoin-focused treasury instead of a traditional software company, has been heavily impacted as its valuation moves in sync with Bitcoin's volatility, creating persistent headwinds.
Still, the company has pressed on with new purchases. Notably, there were no purchases made during the recent dip to $86,000 over the weekend, but instead announced their latest purchase as Bitcoin briefly rose to $90,615.
Some viewed this step as a way to motivate supporters and keep morale high among loyal investors. However, some analysts believe that MicroStrategy's ability to finance future Bitcoin purchases is weakening.
Analyst Novacula Occami noted that, for this latest round of purchases, MicroStrategy was only able to sell $44 million in preferred shares last week, which is a very small amount compared to previous capital raises.
This suggests that the market may be less willing to lend or purchase their preferred shares.
As leverage becomes more challenging, MicroStrategy is reverting to issuing common stock. In this case, 5,1 million MSTR shares were sold at $181 each, diluting existing shareholders.
Given the current circumstances of MicroStrategy, this method may become unsustainable soon.
MicroStrategy experienced a severe downturn in early December when the market capitalization briefly fell below the net value of its Bitcoin assets. This raised new concerns about leverage, liquidity, and overall investor confidence.
The stock price fell to $156, reducing the company's value to $45 billion. At the same time, the value of MicroStrategy's Bitcoin holdings stood at approximately $55.2 billion, marking an unusual period where the market valued the company lower than its underlying assets.
MicroStrategy has since regained its position. However, if the shares were to trade below the value of the assets again, issuing new shares would become more difficult and less effective.
As leverage dries up and the dilution of shares becomes less sustainable, MicroStrategy may face a moment where it cannot raise enough capital to continue its accumulation model.
