MicroStrategy, recognized as the largest publicly traded firm holding Bitcoin (BTC), has recently shifted its approach from aggressive expansion to a more cautious, defensive strategy.
The company’s latest actions reveal a focus on meeting debt commitments and bolstering cash reserves instead of acquiring additional Bitcoin assets.
As the leading institutional investor in cryptocurrency, MicroStrategy has halted its previous method of “selling shares to purchase Bitcoin.” A CNBC report highlights that while the company sold $750 million worth of shares this week, these funds were allocated to increasing cash reserves—now totaling $2.2 billion—instead of buying more Bitcoin.
This newly created fund aims primarily to cover preferential dividend payments and interest on debt without liquidating any Bitcoin holdings. Given that MicroStrategy’s stock price has dropped nearly 50% since early this year, Chairman Michael Saylor suggests the firm is adopting a protective posture amid current market conditions.
Experts note that MicroStrategy’s fundamental business model is at a crossroads. Historically, it relied on selling shares at premium prices and using those proceeds for Bitcoin purchases. Presently, however, its stock trades below the net asset value of its Bitcoin holdings—approximately 80 cents per dollar invested.
This discount phase means issuing new shares could dilute existing investors’ stakes negatively.
The company faces an even greater challenge soon: MSCI is expected to decide by January 15th whether to remove MicroStrategy from their indices. JP Morgan estimates such delisting—and potential follow-up actions by other index providers—could prompt sell-offs totaling around $9 billion.
Although MicroStrategy’s average acquisition cost for each Bitcoin stands near $75,000 compared with today’s trading price close to $89,000—a shrinking margin—the management asserts they can restructure debt before forced liquidation even if prices fall by half. Still, waning market confidence remains their greatest threat.
*This article does not constitute investment advice.*