Accurate strategy (NASDAQ:MSTR) It still sells enterprise software, with a focus on data analytics and business intelligence. However, most investors consider it a straight bet Bitcoin (Crypto: Bitcoin) These days, and for good reason.
Under the authority of co-founder and Chairman Michael Saylor, who also served as CEO of MicroStrategy at the time, the company converted most of its cash reserves into Bitcoin in 2020. MicroStrategy has since sold stock and taken on new debt to finance further Bitcoin purchases, With free cash flow from the software business funneling more Bitcoin purchases.
According to regulatory filings, MicroStrategy now has approximately 423,650 bitcoins on its balance sheet. They were purchased at an average price of $60,324 per coin. This is a $25.6 billion investment, and is currently valued at approximately $42.4 billion. The current value of this Bitcoin wallet represents roughly half of MicroStrategy’s $90.4 billion value Market value.
Which brings me to the metric every MicroStrategy investor should track like a Wall Street hawk. These Bitcoin purchases are more expensive than they appear, and shareholders are footing the bill for a large portion of them. As a result, MicroStrategy shares have nearly doubled in less than two years:
This is very Diluted The strategy has real implications for MicroStrategy’s stock price. The market capitalization increased by 1,410% during the period shown on the chart, while the stock price increased by 657%. No one is complaining about a seven-fold return in two years, but MicroStrategy plans to borrow about $21 billion from shareholders over the next three years, while anticipating a similar amount of debt securities.
So you should keep a close eye on your MicroStrategy share count before hitting the “buy” button. The plan to buy Bitcoin may or may not create wealth over the long term, but fundamental financing moves will certainly undermine shareholder returns along the way.
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