MicroStrategy purchased 4,000 Bitcoin worth approximately $450 million, funding the move primarily by issuing common stock, the company said in a press release. The firm now holds roughly 636,500 Bitcoin, valued near $70.6 billion, after raising about $425 million from common shares and $46.5 million from preferred shares.
The company also relaxed a previous self-imposed constraint that had limited common-stock issuance when its shares traded below a 2.5x premium to its Bitcoin holdings. Under the revised policy MicroStrategy can issue common shares “when otherwise deemed advantageous,” a change that has unsettled some retail investors.
Market observers point to the firm’s multiple-to-net-asset-value, or mNAV, which stood near 1.5x after previously peaking around 3.9x. The stock has drifted to roughly $346 from a recent level near $372, after spiking to about $543 last November following the U.S. election.
Analysts at Benchmark said the earlier constraint may have caused a “chain reaction” where falling mNAV discouraged cheap capital and accelerated premium compression. Benchmark defended the company’s approach, reiterating a Buy rating and a $705 price target while calling MicroStrategy the industry benchmark among public Bitcoin-focused firms.
MicroStrategy also remains a candidate for inclusion in the S&P 500, which could create large passive demand if the index committee approves it. That decision may hinge on how the committee views a business whose income derives largely from Bitcoin price moves.
Why this matters: MicroStrategy’s ongoing Bitcoin accumulation strategy affects corporate treasury dynamics, investor dilution risk and how the market prices a firm whose balance sheet is concentrated in cryptocurrency. Investors should remember that the company’s results are tightly linked to Bitcoin volatility and that additional share issuance can dilute existing holders.
Source: Decrypt. Read the original coverage for full details.