By Tomi Kilgore
The stock is in danger of suffering its first loss in six sessions as bitcoin prices pull back
Shares of MicroStrategy Inc. were in danger of suffering their first loss in six sessions on Tuesday, as bitcoin prices fell and Wall Street’s only bearish analyst on the company made his case for why investors should sell.
MicroStrategy’s stock (MSTR) was falling 1.5% in afternoon trading, after rallying 14% amid a five-day win streak that took it to an eight-month closing high on Monday. Meanwhile, bitcoin (BTCUSD) dropped 2.4% Tuesday afternoon, after rising 10.7% amid a five-day win streak through Monday’s record close.
MicroStrategy, which is doing business as Strategy, is business-analytics software company, but the stock has acted more like a cryptocurrency play since Executive Chair Michael Saylor said in August 2020 that the company was adopting bitcoin as its primary treasury-reserve asset.
The correlation coefficient between MicroStrategy’s stock and bitcoin since then has been a very high 0.93, in which a reading of 1.00 means they move exactly in sync. In comparison, the stock’s correlation with iShares Expanded Tech-Software Sector ETF IGV has been 0.86 over the same time, while the correlation with the S&P 500 index SPX has been 0.87.
On Monday, the company disclosed a purchase of another 4,225 bitcoin tokens last week, the 16th week in the past 18 that it has bought bitcoin. MicroStrategy has spent a total of $42.87 billion over the past five years to acquire 601,550 tokens, a position now worth $70.44 billion at current prices.
Monness Crespi Hardt analyst Gus Gala reiterated his sell rating on the stock, as his $200 price target implies 55.5% downside from current levels. That not only makes Gala the only one, among the 17 analysts who cover MicroStrategy tracked by FactSet, who is bearish on the stock, but also the only one who isn’t bullish.
Even with Gala’s outlier price target, the average analyst price target is $536, which implies 19.1% upside.
It’s not so much the focus on bitcoin that concerns Gala, but how MicroStrategy acquires them. The company is currently operating under a 42/42 capital plan, in which it can issue up to $42 billion worth of common stock and up to $42 billion worth of preferred stock and convertible debt, and use the money raised to buy bitcoin.
What worries Gala is that so far the capital raise has been heavily weighted toward selling new common shares, which dilutes current shareholders. Last week, the percentage of money raised through common-share sales – $330.9 million – represented 70% of the total raise of $472.3 million.
Based on the company’s quarterly filing, MicroStrategy had a total of roughly 273.4 million shares outstanding as of May 2 – up from around 257.4 million shares as of Feb. 4. And just before bitcoin was adopted as its primary treasury asset, there were nearly 96.9 million split-adjusted shares outstanding as of July 20, 2020, which adjusts for the 10-for-1 stock split that was enacted in August 2024.
To put that in perspective, an investor who owned a split adjusted 1,000 shares in MicroStrategy on July 20, 2020 owned 0.001% of the shares outstanding. All the stock sales since then to buy bitcoin has diluted that ownership, as the same 1,000-share stake now represents just 0.0004% of the shares outstanding.
And Gala notes that the company has a lot more shares to issue and sell. As of July 13, the company could still sell $17.78 billion worth of common stock and $26.52 billion worth of preferred stock.
While selling preferred stock is less dilutive, Gala said that the dividend payments required “continue to grow and highlight a potential concern down the road.”
He said if all the preferred stock available to sell were actually sold, “the cost to service dividends on these continues to be premised on either further dilution [and/or] capital raises,” through new instruments and/or bitcoin sales.
Still, MicroStrategy’s stock has run up 53.4% this year, while bitcoin has climbed 25.3%, the iShares Expanded Tech-Software Sector ETF has gained 9.1% and the S&P 500 has tacked on 6.4%.
-Tomi Kilgore
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07-15-25 1520ET
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