MSTR Sinks 25% Since October, Outpacing Bitcoin’s Decline

The world’s largest corporate Bitcoin holder, MicroStrategy, saw its common stock (MSTR) dip below $250 for the first time in seven months. In light of the recent drop that Bitcoin is facing, MSTR — often seen as a Bitcoin by proxy in traditional equity markets — is also on the decline. 

In fact, MicroStrategy's common stock is performing significantly worse than BTC in recent weeks. While Bitcoin fell by around 13% since October 1st, MSTR is registering a ~25% decline in that same period. 

The $250 zone acted as a relevant support zone throughout the year, serving as a first layer for demand to pick up the pace. When it fails, the asset tends to dip all the way to $238 before the next pocket of demand.

This discrepancy against recent BTC performance implies that MicroStrategy’s equity is not only reflecting Bitcoin’s moves but also amplifying them. Since October, MSTR has had a beta of roughly 1.9x to Bitcoin (amplifying BTC moves by about 2x), as investors price in additional risks tied to the company’s leveraged balance sheet and ongoing share dilution.

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Dilution Concerns

On the topic of dilution, the dip below $250 comes on the same date when the company announced a new preferred stock issuance (STRE), a 10% Series A Perpetual Stream Preferred Stock aimed to raise €350 million from European and UK institutional investors. Each share carries a €100 ($114) face value with a steep 10% annual dividend, compounding quarterly if unpaid, and capped at 18%.

The new preferred stock issuance has no conversion rights into common equity, meaning it doesn't directly dilute the share count of MSTR; it still dilutes perceived value for common shareholders, as preferred stock ownership outranks common shareholding in terms of dividend obligations. 

MicroStrategy's main strategy for capital raising in order to fund its Bitcoin strategy has been via issuing new shares of company stock (equity financing) and debt (convertible bonds). While extremely long-term successful -- highlighted by MSTR's 1,200% growth over the last five years -- the approach also introduced growing volatility for shareholders. 

And while the company is subject to dilution fears due to its capital-raising strategy, any talks of potential asset liquidation remain extremely unlikely. Most of its debt stretches several years into the future, and the bulk of its obligations are tied to convertible notes maturing between 2027 and 2031. Not to mention the fact that Michael Saylor retains around 45% of voting rights, ensuring he maintains significant influence over strategic decisions.