On Tuesday, bitcoin fell 1.9% in 24 hours and moved close to $92,000, as per market data cited by MSN. On the same day, Strategy’s stock dropped 4.1%, falling faster than bitcoin. Strategy says its enterprise value is $63.3 billion, which is only about 1% higher than the $62.3 billion value of its bitcoin holdings. Strategy’s stock is now down 66% from its 52-week high, which has badly hurt its ability to keep buying bitcoin.
Bitcoin per share plan
The company’s main plan has been to steadily increase the amount of bitcoin held per share. Strategy argues that its stock gives investors “high-beta” exposure to bitcoin, meaning the stock should rise faster than bitcoin when prices go up. At the same time, this also means the stock can fall faster than bitcoin when prices drop.
To raise its bitcoin holdings by 1%, Strategy would need to increase its share count by more than 1%, which would dilute bitcoin per share, as per the report by MSN. With the stock price now much lower, Strategy would need to issue just over 4 million new shares, or nearly 1.2%, to increase bitcoin holdings by 1%. This creates a problem because buying more bitcoin now would reduce the bitcoin value per share.
Preferred stock costs
Another option is issuing more preferred stock, but that comes with an interest rate of around 11%. Strategy has mostly avoided issuing preferred stock recently. This is because investors have started questioning whether the company can meet its financial obligations. Strategy currently faces about $831 million per year in interest costs.
Despite this, MSN notes that Strategy’s large bitcoin holdings should help it cover these payments in the medium term, even in negative scenarios. Recently, Strategy raised $2.25 billion in cash by selling MSTR stock. The goal of raising this cash was to reassure investors that the company will not face a cash shortage. Strategy also wanted to avoid being forced to sell shares or bitcoin at very low prices in an emergency. However, there is still risk from Strategy’s convertible bonds.
MSCI index decision
Bondholders could ask for early repayment on up to $6.6 billion in low- or zero-interest loans in 2027 and 2028. This could happen if the stock stays well below the conversion price. Strategy has written a letter to MSCI defending its inclusion in MSCI indexes. In the letter, Strategy said investors gave the company a big premium because they trust its management. Executive Chairman Michael Saylor and CEO Phong Le said this premium shows Strategy is not just a passive bitcoin-holding fund. Saylor has said Strategy wants to become the leading digital credit company. He said the company aims to offer high-interest financial products backed by bitcoin. These financial products are Strategy’s preferred shares.
Most of these preferred shares pay interest of 10% or more, though terms vary. MSN says this model only works for both common and preferred shareholders if bitcoin rises by much more than 10% a year. Investors are advised to follow broader market trends, including through IBD’s The Big Picture column, to understand what these moves mean for trading decisions, as per Investor’s Business Daily.
FAQs
Q1. Why is Strategy (MSTR) finding it harder to buy more bitcoin?
Because its stock price has fallen and the extra value above its bitcoin holdings has almost disappeared.
Q2. Why is the MSCI decision important for Strategy?
Because staying in MSCI indexes helps keep investor interest and demand for the stock.
