Strategy's Equity Shift Seen as Flexibility Boost, Not Retreat from Bitcoin Strategy

Strategy's (MSTR) recent share-price weakness has been criticized by retail investors, but Benchmark analyst Mark Palmer says it's due to market dynamics, not capital mismanagement. Palmer argues that Strategy's recent update to allow tactical equity issuance below a 2.5x premium to its bitcoin net asset value restores flexibility and maintains its accumulation flywheel. He also highlights the company's financial innovation, including its preferred stock program, and potential inclusion in the S&P 500 index. Palmer reiterated his buy rating and $705 price target.

MicroStrategy, led by executive chairman Michael Saylor, has been making headlines with its aggressive Bitcoin accumulation strategy. The company, which holds 636,505 BTC valued at approximately $70 billion, is a strong candidate for inclusion in the S&P 500 index [1]. However, its recent share-price weakness has sparked criticism from retail investors, who accuse the company of undermining financial discipline by loosening its self-imposed rule against issuing equity when the company’s multiple net asset value (mNAV) fell below 2.5x [5].

Benchmark analyst Mark Palmer, however, defends these actions, arguing that the recent share-price weakness is not due to mismanagement but rather a result of broader market dynamics, including a narrowing premium to Bitcoin holdings and volatility in the crypto sector [1]. According to Palmer, the company's decision to relax the mNAV constraint was a rational step to maintain its ability to acquire more Bitcoin during market weakness, preserving its accumulation flywheel.

MicroStrategy's financial flexibility has also expanded the market for Bitcoin-linked securities, particularly through its preferred stock offerings. These instruments have validated the company’s strategy and broadened its investor base, reinforcing its role as a bridge between traditional finance and crypto markets [1].

As the S&P 500 index prepares for its September rebalance, MicroStrategy is emerging as a strong candidate for inclusion. Its market capitalization of $96.84 billion comfortably exceeds the index’s inclusion threshold of $22.7 billion [1]. However, the company’s earnings, which are largely derived from unrealized gains on Bitcoin holdings, may present a challenge for the S&P 500 committee. Unlike Coinbase (COIN) and Block (XYZ), which already reside in the index, MicroStrategy’s financial performance is heavily tied to the fluctuating value of Bitcoin, raising concerns about the sustainability and volatility of its earnings [4].

If included, MicroStrategy’s stock could experience a significant boost from passive inflows, mirroring the impact seen when Coinbase and Block were added. This would mark a milestone in the institutional adoption of crypto assets and solidify MicroStrategy’s role as one of the clearest and most liquid investment vehicles for Bitcoin exposure [1]. Benchmark analysts have reiterated a “buy” rating for the stock with a $705 price target, more than double its current share price [1].

The potential addition of MicroStrategy to the index highlights the evolving relationship between traditional equity markets and the crypto sector. While the S&P 500 has historically excluded speculative assets, the increasing influence of Bitcoin and the innovative balance sheet strategies of firms like MicroStrategy are challenging conventional definitions of market representation. This development could catalyze further interest in crypto-related equities, especially as investors seek to diversify their portfolios in response to macroeconomic uncertainty and inflationary pressures.

References:
[1] https://www.ainvest.com/news/bitcoin-news-today-microstrategy-bitcoin-bet-redefine-500-2509/
[2] https://247wallst.com/investing/2025/09/03/rivian-automotive-nasdaq-rivn-stock-price-prediction-for-2025-where-will-it-be-in-1-year/
[3] https://tickeron.com/compare/BLOK-vs-MSTR/
[4] https://finance.yahoo.com/news/microstrategy-eyes-p-500-analyst-201103867.html
[5] https://www.theblock.co/post/369156/benchmark-defends-strategys-equity-sales-for-bitcoin-accumulation-sees-sp-500-potential