MicroStrategy shares drop 8% after $209M Bitcoin purchase

MicroStrategy (MSTR) shares slid 8% following its announcement of a $209 million Bitcoin acquisition, sparking concerns among investors about the company’s increasing reliance on leverage.

The purchase was disclosed an hour before trading began on the Nasdaq stock exchange, with MSTR shares falling 5.3% from $318.89 to $302.09 within the first hour of trading.

Despite partial recovery during the session, MicroStrategy’s stock closed at $302.96.

Post-market trading saw an additional 3.19% dip, leaving the shares at $293.59, according to Google Finance data.

MicroStrategy financed the Bitcoin acquisition by selling 592,987 shares earlier in the week, marking its eighth consecutive week of BTC purchases.

Since October 31, the company has added 194,180 BTC to its holdings, continuing its aggressive Bitcoin (CRYPTO:BTC) accumulation strategy.

Market analysts expressed concerns about MicroStrategy’s financial strategy.

According to The Kobeissi Letter, the company’s proposed increase in authorised shares from 330 million to 10.33 billion has raised alarms.

Critics argue that the firm’s reliance on convertible notes and debt issuances has left it in a precarious position, needing further debt or equity issuance to sustain its Bitcoin buying spree.

Hartmann Capital founder Felix Hartmann predicted that MSTR’s stock price could “eventually implode,” but acknowledged the possibility of significant gains in a bullish market.

“Within 5 years, MSTR will first become a top 5 company by market cap before eventually going bankrupt,” Hartmann said.

Unchained’s head of market research Joe Burnett described MicroStrategy’s approach as “hyperbitcoinisation,” leveraging its stock premium to increase its Bitcoin-per-share ratio.

“Trading at a premium lets them sell shares above NAV, buy more bitcoin, and reduce leverage—further increasing BTC per share,” Burnett noted.

At the time of reporting, the Bitcoin price was $92,509.09.