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.
Before buying shares in MicroStrategy, consider this:
the Motley Fool stock advisor The analyst team has just defined what they think it is Top 10 stocks For investors to buy now…and MicroStrategy wasn’t one of them. The 10 stocks that were discounted could deliver huge returns in the coming years.
Think when Nvidia I prepared this list on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $853,765!*
Stock advisor It provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. the Stock advisor The service has More than four times The return of the S&P 500 since 2002*.