MicroStrategy’s Bitcoin Treasury Strategy and Its Disconnection from Share Price Performance

MicroStrategy’s (MSTR) transformation into a corporate Bitcoin treasury has redefined its valuation dynamics, yet its stock price increasingly diverges from the intrinsic value of its holdings. As of September 2025, the company holds 636,505 bitcoins valued at $70.6 billion, with an average purchase price of $66,384.56 per BTC [1]. Despite this, MicroStrategy’s market capitalization—ranging between $90 billion and $96.87 billion—suggests a disconnect, as its Bitcoin portfolio alone constitutes roughly 73% of its total asset value [3]. This raises a critical question: Is the stock mispriced relative to its net asset value (NAV), and does this present a compelling entry point for long-term investors?

Bitcoin Accumulation and NAV Premium

MicroStrategy’s balance sheet is anchored by its Bitcoin holdings, which totaled $64.4 billion in market value as of June 30, 2025, against an original cost basis of $42.4 billion [2]. Total assets for Q2 2025 reached $64.77 billion, while liabilities stood at $14.4 billion, yielding a NAV of approximately $50.37 billion [5]. However, the company’s market capitalization exceeded $95 billion as of September 2025, implying a premium of 1.79x over NAV [6]. This premium historically reflected confidence in MicroStrategy’s ability to raise capital at favorable rates and monetize Bitcoin volatility through strategies like covered calls. Yet, recent shifts in equity issuance policies and Bitcoin price dynamics have eroded this premium.

In August 2025, MicroStrategy relaxed its stock issuance rules, permitting share sales below 2.5x market-implied NAV (mNAV) to fund Bitcoin purchases or debt payments [1]. This reversal of a July 2025 commitment to limit dilution triggered a sharp sell-off: The stock plummeted 89.81% in 24 hours to $0.397, far outpacing Bitcoin’s 8.6% decline during the same period [1]. The mNAV premium collapsed from 3.63x in November 2024 to 1.58x by late August 2025, signaling growing investor skepticism about the sustainability of MicroStrategy’s leveraged model [1].

Equity Dilution and Earnings Per Share (EPS) Dilution

MicroStrategy’s aggressive Bitcoin accumulation has been funded by a 46% increase in shares outstanding over the last twelve months, primarily through at-the-market (ATM) programs and perpetual preferred share issuances [1]. While the company reported a diluted EPS of $32.60 in Q2 2025—driven by $14 billion in unrealized Bitcoin gains—its FY2025 guidance of $80 per share relies on continued capital raising [3]. This creates a paradox: The same equity dilution that fuels Bitcoin purchases also suppresses EPS growth, splitting net income across an expanding share count.

Analysts argue that EPS, rather than net income, is the true barometer of long-term shareholder value in dilutive capital structures [2]. MicroStrategy’s Q2 2025 results, though impressive on paper, masked a $12 billion free cash flow burn, raising concerns about the reliability of its profitability [1]. The company’s balance sheet, while robust, is increasingly viewed as a double-edged sword: Its ability to withstand an 80% Bitcoin drawdown through preferred equity issuance [4] contrasts with its declining software revenue margins and operational cash flow challenges [6].

Sentiment Shifts and Regulatory Risks

Investor sentiment toward MicroStrategy has been further clouded by legal and regulatory headwinds. Securities fraud lawsuits allege misleading disclosures about Bitcoin strategy risks, while the adoption of ASU 2023-08—requiring Bitcoin to be reported at fair value—resulted in a $5.91 billion unrealized loss on its balance sheet [2]. These factors have contributed to a flight of risk-averse capital, particularly as Bitcoin’s volatility amplifies MicroStrategy’s leveraged exposure.

Yet, the company’s unique positioning as a corporate Bitcoin treasury remains a draw for high-risk, high-return investors. Its ability to raise $6.8 billion in Q2 2025 through stock and preferred share offerings [4], coupled with a balance sheet that remains unencumbered and fully liquid [3], underscores its financial engineering prowess. For long-term investors, the key question is whether the current stock price—trading at a discount to NAV—reflects a temporary market overreaction or a fundamental reassessment of MicroStrategy’s risk profile.

Is the Stock Mispriced? A NAV-Based Assessment

To assess mispricing, we compare MicroStrategy’s market capitalization to its NAV. As of Q2 2025, the company’s NAV was $50.37 billion, while its market cap ranged between $90 billion and $96.87 billion [5]. This suggests the stock historically traded at a premium, but recent volatility has inverted this dynamic. If we assume Bitcoin’s price stabilizes or appreciates, and MicroStrategy’s equity dilution slows, the current discount could represent a buying opportunity. However, this hinges on the company’s ability to navigate Bitcoin’s inherent volatility, manage legal risks, and demonstrate operational resilience beyond its Bitcoin-centric narrative.

Conclusion

MicroStrategy’s Bitcoin treasury strategy has created a unique hybrid entity—part technology company, part crypto hedge fund. While its stock price has diverged from NAV due to dilution and sentiment shifts, the intrinsic value of its Bitcoin holdings remains substantial. For long-term investors, the current discount offers a potential entry point, but it demands a high tolerance for volatility and regulatory uncertainty. As the company navigates its next phase, the interplay between Bitcoin’s price trajectory, equity issuance discipline, and operational performance will determine whether this mispricing corrects—or deepens.

Source:
[1] MicroStrategy Updates Equity Issuance Policy, Allowing Stock Sales Below 2.5x mNAV [https://mlq.ai/news/microstrategy-updates-equity-issuance-policy-allowing-stock-sales-below-25x-mnav/]
[2] MicroStrategy Latest Analysis: Bitcoin Strategy and Legal Turbulence [https://monexa.ai/blog/microstrategy-incorporated-mstr-latest-analysis-le-MSTR-2025-07-10]
[3] Strategy Announces Second Quarter 2025 Financial Results [https://www.strategy.com/press/strategy-announces-second-quarter-2025-financial-results_07-31-2025]
[4] MSTR Q2 2025: Balance Sheet Withstands 80% BTC Drop [https://fintool.com/app/research/companies/MSTR/earnings/Q2%202025]
[5] MicroStrategy 10Q 2025 Q2 Quarterly report | MSTR Filing [https://capedge.com/filing/1050446/0000950170-25-102209/MSTR-10Q-2025Q2]
[6] EarningsCall · MSTR Q2 2025 [https://earningscall.biz/e/nasdaq/s/mstr/y/2025/q/q2]