Bitcoin Surges Ahead as Strategy Stock Lags
MicroStrategy’s (MSTR) stock performance is diverging from Bitcoin’s recent price surge, raising questions about the company’s future. While Bitcoin has climbed approximately 13% to near $110,000, MSTR shares have fallen 3%, trading around $372. This gap, widening since mid-May, challenges the market sentiment towards the company that pioneered corporate Bitcoin treasury strategies.
Despite its pioneering role, MicroStrategy’s stock hasn’t mirrored Bitcoin’s rally. A key factor is the increasing number of public companies adopting similar strategies. Over 113 public companies globally now hold Bitcoin on their balance sheets, with 11 new entrants in the past 30 days. This rise in competition is compressing MicroStrategy’s market premium, suggesting its early-mover advantage is diminishing.
MicroStrategy’s multiple to net asset value (mNAV), a key metric reflecting market valuation relative to Bitcoin holdings, has dropped to 1.80, one of its lowest points in a year. This is calculated by dividing the enterprise value (EV) – encompassing market cap, convertible debt, preferred shares (STRK and STRF), minus cash balance – by the market value of its Bitcoin holdings. A lower mNAV restricts MicroStrategy’s ability to issue new equity without significant shareholder dilution, although it remains above 1x, providing some flexibility.
MicroStrategy’s recent purchase of 4,020 Bitcoin for $427 million, its smallest since May 5th, highlights a shift in funding. The acquisition was financed through a mix of common stock (81.7%), preferred securities STRK (15.9%), and STRF (2.4%), according to analyst Ben Werkman. This diversification suggests a strategic shift towards alternative financing methods via its at-the-market (ATM) offering, potentially to mitigate shareholder dilution and optimize capital raising within the current compressed mNAV environment. The company now holds over 580,000 Bitcoin. The changing dynamics underscore the evolving landscape of corporate Bitcoin adoption and its impact on MicroStrategy’s valuation.
