Bitcoin News Today: MSTR's Capital Gambit Sparks Trust Concerns Amid Bitcoin Woes

MicroStrategy CFO James E. Valliant sold $20 million worth of MSTR stock in August, according to records filed with the U.S. Securities and Exchange Commission. This move comes amid ongoing volatility in MicroStrategy’s stock price, which has fallen to its lowest level since April 2024 following the company’s decision to revise its capital raising strategy for purchasing additional bitcoin. On Tuesday, the company’s shares closed down 7.43% at $336.57, marking a significant decline from its high of $455.9 during the July bitcoin rally [1]. The sale of shares by Valliant underscores the company’s active management of its capital structure, particularly as it seeks to fund further bitcoin accumulation amid a broader downturn in cryptocurrency prices. Bitcoin has recently fallen to around $113,000, prompting renewed discussions about the financial strategy of bitcoin-holding companies like MicroStrategy [1].

The company’s revised stock sale policy has also sparked concern among investors. In a recent post on X, MicroStrategy’s CEO Michael Saylor announced updated guidance for the MSTR Equity ATM (At-The-Market) program, allowing the company to issue new shares when the stock trades under 2.5 times its net asset value (NAV). The change from the previous stance—where the company had committed to not issuing shares below 2.5x NAV—has drawn criticism from some shareholders, who view it as a potential conflict of interest or a lack of consistency in management communication [1]. One user on the platform expressed doubt, questioning the rationale behind the change and suggesting that such shifts in policy could erode investor trust [1].

MicroStrategy’s stock has been underperforming relative to other bitcoin-holding companies and the broader technology sector over the past month. Shares have declined 14.7% in the last 30 days, compared to a 0.3% increase for the Zacks Computer - Software industry and a 3% rise for the Zacks Computer and Technology sector [2]. The company holds 628,791 bitcoins as of July 29, making it the largest corporate holder of the cryptocurrency. In contrast, competitors like Tesla, MARA Holdings, and Riot Platforms have held 11,509, 49,951, and 19,273 bitcoins, respectively, as of June 30 [2]. Despite this dominance in the bitcoin space, MicroStrategy’s stock has seen a sharper drop than Tesla, which has gained 2.1% in the same period [2].

The company’s capital raising strategy through preferred equity offerings has been a notable development. MicroStrategy has issued a total of $10.7 billion in equities and $7.6 billion in fixed-income securities year to date. These offerings include convertible notes, STRF, STRC, STRK, and STRD, which together represent key components of the company’s capital structure [2]. STRK, for instance, offers an 8% dividend coupon and has an effective yield of 7.5% as of July 29, while STRF offers a 10% cash dividend with enhanced payment protection features and an 8.7% yield [2]. These instruments are part of MicroStrategy’s broader effort to secure capital for debt interest, dividends, and further bitcoin purchases [2].

Looking ahead, the company has outlined ambitious projections based on the assumption that bitcoin reaches $150,000 by year-end. It expects operating income of $34 billion, net income of $24 billion, and earnings of $80 per share. While these figures are optimistic, they hinge on the continued rise of bitcoin’s price and the success of MicroStrategy’s capital strategies [2]. The company’s disciplined approach to raising capital and its strategic use of preferred equity offerings suggest a focused effort to balance debt obligations with growth opportunities, particularly as it continues to position itself as a leading corporate bitcoin holder.

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[1] Strategy's MSTR hits lowest since April as company eyes ... (https://www.theblock.co/post/367593/michael-saylors-strategy-shares-lowest-since-april)

[2] Strategy Falls 15% in a Month: Hold or Fold the MSTR Stock? (https://finance.yahoo.com/news/strategy-falls-15-month-hold-162300910.html)