Introduction
MicroStrategy, the corporate world’s most aggressive Bitcoin accumulator, has abruptly paused its cryptocurrency purchasing program for the first time in weeks, signaling potential distress as its stock price hovers near 14-month lows. The company’s shares have plummeted 38% this year while facing the looming threat of removal from major financial indices, marking a significant reversal for Michael Saylor’s Bitcoin-focused corporate strategy that once captivated Wall Street.
Key Points
- MicroStrategy's stock has fallen 67% from its 2023 peak of $543, with shares down 38% year-to-date
- Potential removal from MSCI indices could trigger $11.6 billion in outflows according to JPMorgan analysis
- Company's market cap has dropped below the value of its Bitcoin holdings, limiting traditional funding methods
A Sudden Pause in Bitcoin Accumulation
MicroStrategy broke from its established pattern last week when it failed to announce any new Bitcoin purchases, ending a multi-week streak of consistent acquisitions. According to TD Cowen Analyst Lance Vitanza, the company “did not issue any securities under any of its ATMs, nor did it purchase any incremental Bitcoin,” referring to the at-the-money offering programs that have historically funded its cryptocurrency buying spree. This silence was particularly notable given that MicroStrategy typically starts each week by highlighting additions to its Bitcoin stockpile.
The pause comes at a critical juncture for the company, with its stock price falling 38% over the past month as Bitcoin’s price retreated from all-time highs. MicroStrategy shares rose 5% on Friday to $179 but remain down 67% from last year’s peak of $543. The timing of this purchasing halt aligns with similar pauses that occurred around the end of the preceding two fiscal quarters, suggesting potential strategic recalibration rather than mere coincidence.
The MSCI Delisting Threat and Market Consequences
Perhaps the most immediate threat to MicroStrategy’s stability comes from potential removal from MSCI indices in February. Vitanza acknowledged this possibility in a separate report, describing the decision “may be as misguided as it is unfortunate.” The classification issue stems from MSCI flagging MicroStrategy’s similarities to investment funds, which aren’t eligible for inclusion in certain indices.
JPMorgan analysts have quantified the potential damage, warning that MicroStrategy outflows could reach $11.6 billion if MSCI removes the company from its indices next year and similar companies follow suit. Vitanza pushed back against the investment fund comparison, describing MicroStrategy as “a public operating company with a $500 million software business and a unique treasury strategy using Bitcoin as productive capital.” Nevertheless, he acknowledged that removal from MSCI indices would trigger “substantial selling of MSTR common shares at a time the company is already trading at steeply depressed levels.”
Funding Challenges and Strategic Shifts
MicroStrategy’s fundamental business model faces unprecedented pressure as its market capitalization has slipped below the value of its Bitcoin holdings. This development prevents the company from using its traditional strategy of issuing common stock to grow its Bitcoin holdings per share, a method that has historically fueled its cryptocurrency accumulation.
With issuing common stock becoming less lucrative this year, the company has pivoted to raising billions of dollars through various preferred shares that offer dividend payments to fund Bitcoin purchases. This shift represents a significant departure from its established funding approach and reflects the challenging market conditions the company now navigates.
Despite these headwinds, MicroStrategy maintains a substantial Bitcoin position, owning nearly 650,000 Bitcoin worth $57.8 billion as of Monday. The cryptocurrency’s price volatility remains a central factor in the company’s fortunes, with Bitcoin falling as low as $82,175 last week before recovering to around $89,000. Market sentiment appears divided on Bitcoin’s next move, with a Myriad prediction market showing 69% of respondents believing Bitcoin will reach $100,000 while the remainder expect a decline to $69,000.
📎 Source reference: decrypt.co