MicroStrategy Abandons 2.5x mNAV Guidance, Opens Door for Further Dilution

MicroStrategy has abandoned its promise not to dilute MSTR below a 2.5 multiple of its net asset value (mNAV) except to pay interest and dividends. Founder Michael Saylor has modified the guidance to allow for dilution when deemed advantageous to the company. This change is significant as MSTR's value is largely tied to its mNAV, which has dropped to 1.62, making dilution a potential concern for shareholders.

MicroStrategy has recently made a significant shift in its financial strategy by modifying its guidance on diluting MSTR stock. The company, previously committed to not diluting MSTR below a 2.5 multiple of its net asset value (mNAV) except to pay interest and dividends, has now changed its stance to allow for dilution when deemed advantageous to the company [1]. This move comes amidst a declining mNAV, which has dropped to 1.62, making dilution a potential concern for shareholders.

The change was announced after Michael Saylor, the company's founder, altered slide 96 of the July 31 earnings presentation. This slide now includes a new clause that allows dilution between a 1x and 2.5x mNAV "when otherwise deemed advantageous to the company" [1]. The decision has sparked criticism from influential figures within the crypto community, with prominent Strategy influencer Josh Mandell accusing Saylor of lying about the company's intentions [1].

The move follows a period of underperformance for MSTR stock, which has traded around $360 despite Bitcoin's price hitting all-time highs. The stock's premium over Bitcoin holdings has fallen from a high of 3.4x to 1.6x, prompting Saylor to ease restrictions on issuing MSTR stock to fund Bitcoin acquisitions [3]. The company's aggressive BTC purchases have also raised concerns about market centralization, with institutional dominance now exceeding $414 billion in Bitcoin holdings [2].

The shift in strategy is a response to the changing market conditions and the need to maintain the company's Bitcoin holdings. However, the move has been met with skepticism and concern from some investors and analysts. While the company's long-term strategy remains focused on Bitcoin, the recent changes highlight the challenges faced by the company in balancing its financial obligations with its cryptocurrency ambitions.

References:
[1] https://protos.com/strategy-loyalists-sell-mstr-say-michael-saylor-lied-about-dilution/
[2] https://www.ainvest.com/news/bitcoin-news-today-blackrock-5-strategy-stake-fuels-bitcoin-market-centralization-concerns-2508/
[3] https://coincentral.com/michael-saylor-reverses-stance-on-mstr-stock-issuance-amid-bitcoin-slump/