Why MicroStrategy (MSTR) Stock Is Nosediving

What Happened?

Shares of bitcoin development company MicroStrategy (NASDAQ:MSTR) fell 6.1% in the afternoon session after a broad sell-off in the cryptocurrency market sent the price of Bitcoin tumbling. The software firm, known for its significant Bitcoin holdings, often sees its stock price move in line with the digital asset. The world's largest cryptocurrency fell below $112,000, its lowest point in two weeks, amid a wider crypto rout that wiped out more than $140 billion in market value since the beginning of the week.

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What Is The Market Telling Us

MicroStrategy’s shares are extremely volatile and have had 72 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 3 days ago when the stock dropped 2.3% on the news that the company announced it purchased an additional 850 bitcoins for $99.7 million, funding the acquisition by selling its own shares.

The move boosted MicroStrategy's total Bitcoin holdings to 639,835, yet the market reacted negatively. The company financed the purchase through an 'at-the-market' stock offering. This practice allows the company to build its crypto reserves without taking on new debt, but it also dilutes the ownership stake of existing shareholders. Investors often react poorly to such moves as dilution can reduce the value of their shares. The news contributed to the stock hitting a five-month low. This followed a period where the company's shares had already underperformed Bitcoin, signaling potential investor weariness with the strategy of repeatedly issuing new stock to buy more of the digital asset.

MicroStrategy is up 1.6% since the beginning of the year, but at $304.74 per share, it is still trading 35.7% below its 52-week high of $473.83 from November 2024. Investors who bought $1,000 worth of MicroStrategy’s shares 5 years ago would now be looking at an investment worth $20,854.

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