MicroStrategy Faces Sharp Decline: Shares Drop 46% from November Peak

MicroStrategy Faces Sharp Decline: What’s Behind the Slide?

After-hours trading on Monday saw MicroStrategy (MSTR) shares drop below $300, a 46% decrease from their peak in November. The drop comes after the business proposed, amid misgivings, to raise billions of shares of its stock to back its $42 billion funding plan.

Google Finance data indicates that MicroStrategy’s stock finished at $302.96, down 8.2% on Monday, the lowest since November 8. After that, the stock dropped 3% more to $293.59 during extended trading hours. MicroStrategy’s stock has had a notable increase for the bulk of this year, rising 342% so far. At a time when the price of bitcoin increased by 121% a year, this aligned with its aggressive approach of accumulating bitcoin.

The company’s 21/21 strategy, which calls for raising $42 billion over the next three years, was revealed in October. To support its bitcoin purchases, MicroStrategy plans to raise $21 billion by issuing additional shares and the remaining half by issuing fixed-income securities. Earlier this month, the company proposed to expand Class A ordinary shares by 10 billion and preferred shares by 1 billion in order to support the strategy.

Nasdaq Inclusion Fails to Halt MSTR’s Decline Amid Bitcoin Buying Spree

With the acquisition of 2,138 BTC last week, MicroStrategy increased its total Bitcoin holdings to 446,400 BTC. On December 23, the tech-heavy Nasdaq 100 index also included the stock. MSTR has been declining since reaching an intraday high of $543 on November 21st, even with the increased bitcoin purchases and the Nasdaq inclusion.

Nick Ruck, head of LVRG Research, noted that because MSTR used more debt and equity to buy bitcoin, investors may have begun to see the company as overly risky. MicroStrategy mostly uses convertible notes and bonds to raise money for its Bitcoin purchases.

Existing shareholders are diluted when the company buys more BTC, but if it doesn’t, it may signal the company has stalled on a major part of its value proposition. This places MSTR in dangerous territory, as bitcoin has already seen an enormous increase in the past few months while the U.S. struggles to keep inflation under control with an uncertain economic future as the new White House administration is set to soon take over.

Ruck

For more up-to-date crypto news, you can follow Crypto Data Space.