MicroStrategy stock and Bitcoin price have been closely correlated in the past as the company became the largest BTC investor.
Shares of MicroStrategy are down 21% in the last 30 days, while Bitcoin (BTC) is down less than 2%. This represents a significant divergence as MSTR stock has typically moved in parallel with Bitcoin.
The stock is up over 320% this year, while Bitcoin has gained 120%. Its outperformance over Bitcoin combined with the lack of expense ratio has led some investors to consider it a better alternative to BTC and Bitcoin ETFs.
MSTR has continued to accumulate Bitcoin this year and currently holds 446,400 coins worth over $42 billion. This figure is well below the company’s market capitalization of over $65 billion.
The main reason for the current divergence between Bitcoin and MicroStrategy stocks is the company’s announcement that it will issue 10 billion shares to fund new Bitcoin purchases. The medium-term goal is to raise $42 billion through equities and fixed income between 2025 and 2027.
According to Yahoo Finance, the company has 225 million shares outstanding, meaning the share count will increase by over 4,344%. Raising capital through the issuance of equity dilutes existing shareholders and reduces their stake in the company. For a profitable company, this also reduces earnings per share.
In a detailed X-thread, The Kobeissi Letter described the company’s predicament. Raising more equity will dilute existing shareholders, but if the stock reauthorization fails, MicroStrategy will…
