Despite a significant increase in Bitcoin acquisitions, Strategy continues to lag behind Bitcoin’s performance.
Summary
- Saylor confirmed the acquisition of an extra 850 BTC at a cost of $99.7 million
- Strategy’s total Bitcoin reserves now stand at 639,835 BTC, valued at approximately $73.92 billion
- Even with this increase, MSTR shares declined by 5% over the past month, while Bitcoin saw a smaller drop of 1.45%
Michael Saylor’s Strategy is reinforcing its commitment to Bitcoin purchases, even as its stock price declines. On Sunday, September 21, the firm disclosed its intention to buy 850 Bitcoin (BTC) for $99.7 million. Nonetheless, this action has not rallied investor confidence, as the stock continues to underperform compared to Bitcoin. Notably, in the last month, MSTR shares have decreased by about 5%, whereas Bitcoin fell by merely 1.45%.
Strategy announced this acquisition and its current holdings in a SEC Form 8-K filing on September 22, accessible here. This recent purchase elevated the company’s total Bitcoin holdings to 639,835 BTC, with an estimated value of $73.92 billion. However, the acquisition was mainly funded through stock sales in an at-the-market program, highlighting potential weaknesses in its funding strategy.
While equity sales allow Strategy to build reserves without incurring additional debt, this tactic also dilutes existing shareholders, which investors may view unfavorably. Additionally, relying solely on equity sales detracts from the leverage that previously enabled Strategy to exceed Bitcoin’s performance.
Is Saylor’s Strategy heading for a correction?
A shift away from debt financing indicates a tepid interest in Strategy’s convertible bonds as investors scrutinize the company’s high valuation. Currently, Strategy boasts a market cap of $97.43 billion, in contrast to its Bitcoin assets valued at $73.92 billion.
This billion-dollar gap is leading some traders to doubt whether the company’s valuation should exceed that of its Bitcoin reserves. Thus far, Strategy has defended its valuation by highlighting its capacity to acquire Bitcoin using debt. However, if funding avenues become scarce, the company could confront a considerable correction, potentially impacting its cash flow.
An alarming indication of this precarious situation is Saylor’s response to his critics. He attributed negative sentiments about his company to bots aiming to manipulate market perceptions of the stock.
