Block, Inc. Stock Falls 50% in 5 Years Amid Slow Growth and Competition

Block Inc, a fintech firm tied to Bitcoin, has seen its stock fall 48% over the last five years due to slow growth in a competitive market. Investors who put $10,000 in the stock five years ago would now have only $5,000. Other Bitcoin-related stocks like Coinbase and Argo Blockchain have also declined, with Coinbase losing 18% and Argo Blockchain declining 98% over the same period.

Michael Saylor’s once-celebrated Bitcoin experiment at Strategy Inc., formerly known as MicroStrategy, is facing a significant market backlash. The company, which has been a bellwether for crypto sentiment, is drawing fresh skepticism due to its financing tactics and the declining premium on its Bitcoin holdings. Shares of Strategy Inc. have fallen 15% this month, erasing much of the premium the firm long enjoyed over its Bitcoin reserves [1].

At the heart of the concern is the firm’s financing tactics. Strategy’s new preferred stock, intended to be the main vehicle for future Bitcoin purchases, has drawn tepid demand. A recent sale raised just $47 million, well short of Saylor’s ambition for blockbuster capital raising. To make up the shortfall, the company has returned to common-share issuance, despite earlier pledges to limit dilution. This reversal has rattled investors [1].

The stakes extend far beyond one company. Saylor’s playbook—raise debt and equity, buy Bitcoin, watch the market assign a premium, repeat—has inspired a wave of treasury firms that collectively hold more than $108 billion, or 4.7% of Bitcoin’s supply [1]. If Strategy’s premium collapses, confidence in the model itself could unravel.

Strategy’s stock ceased trading on earnings potential and began trading on a multiple of its Bitcoin holdings, known as mNAV. That multiple has swung before, collapsing during the Terra-Luna crisis, rebounding to 3.4 after Donald Trump’s re-election, and now sits at 1.57. However, the current decline comes not during a crypto winter, but amid a boom [1].

The broader cohort of Bitcoin treasury companies is under pressure. According to Capriole Investments, nearly a third of publicly traded companies with Bitcoin on their balance sheets now trade below the value of those reserves. Smaller firms are particularly vulnerable, with limited liquidity making equity issuance more painful and reliance on convertible notes bringing interest burdens and maturity risk [1].

Block Inc., a fintech firm tied to Bitcoin, has seen its stock fall 48% over the last five years due to slow growth in a competitive market. Investors who put $10,000 in the stock five years ago would now have only $5,000. Other Bitcoin-related stocks like Coinbase and Argo Blockchain have also declined, with Coinbase losing 18% and Argo Blockchain declining 98% over the same period [1].

The field has also grown more crowded. Over the past year, influencers and politically connected figures have rushed to launch crypto vehicles through SPACs and reverse mergers. Many lack the scale or trading liquidity of Strategy and could prove less durable in a downturn [1].

The rise of spot Bitcoin ETFs has further challenged the treasury model. Initially, Strategy and the exchange-traded funds both benefited from a post-election rally. However, the comparison has grown less favorable, with funds offering exposure to Bitcoin without the risks tied to corporate governance, leverage, or dilution [1].

Investors are momentum investors. When the price is going up, they are buyers. When the price goes down or remains flat, there is less enthusiasm [1]. Attention is shifting toward other digital assets like Ether and Solana, seen by some as better suited to decentralized finance. Ether-focused treasuries alone have committed more than $19 billion [1].

Bitcoin itself has eased back from highs reached earlier this month but remains buoyed by institutional allocations. Many newer treasury firms bought in above $100,000 and lack underlying businesses to sustain them if the market turns [1].

References:
[1] https://finance.yahoo.com/news/michael-saylor-hit-market-revolt-130000575.html