Strategy has made headlines with its announcement of its largest Bitcoin purchase in over four months, investing $835 million into the cryptocurrency as its value dipped. This substantial acquisition brings the company’s total Bitcoin holdings to nearly 650,000, which is currently valued at around $61 billion. Bitcoin’s recent market fluctuations show it changing hands at approximately $94,000, reflecting an 11% decline over the preceding week, as reported by crypto data provider CoinGecko.
This latest investment is particularly significant as it coincides with the launch of the company’s euro-denominated preferred shares, which are now trading in Luxembourg under the ticker symbol STRE. The firm reported that the move generated approximately $700 million in net proceeds, which has further fueled its Bitcoin-buying ambitions. Notably, Strategy also sold $136 million worth of preferred shares that yield dividend payments. This year alone, the company has created four distinct types of preferred shares to bolster its ability to acquire Bitcoin through diversified funding sources.
Despite the bullish investment in Bitcoin, Strategy’s stock faced a decline of 1.5% on Monday, settling just below $197. The company’s stock has seen a sharp drop of 31% over the past month due to the overall decline in Bitcoin prices from their all-time highs. Recently, Michael Saylor, the co-founder and Executive Chairman, asserted that the company’s Bitcoin acquisition efforts are intensifying, particularly at a time when the asset’s price hovers near six-month lows. In a message on X, he emphasized, “We bought Bitcoin every day this week,” refuting speculation about liquidating any of their Bitcoin reserves.
Traditionally, Strategy has relied on issuing common stock as a means of financing its Bitcoin purchases, but this approach has become less effective as the market value of Strategy’s shares has grown closer to that of its Bitcoin assets. As of Monday, the company continued to trade at a discount relative to its Bitcoin holdings, with a market capitalization of approximately $56.7 billion resulting in a multiple-to-net asset value of 0.93x. This situation is indicative of a broader trend impacting several firms known for Bitcoin accumulation, as market premiums have diminished over recent weeks.
Investor sentiment has been affected by concerns over potential dilution, as pointed out by crypto research firm 10x. Earlier this summer, Strategy attempted to modify its approach to issuing common shares in a bid to demonstrate fiscal discipline, yet it has altered its policy to afford more flexibility in capital raising.
While scrutiny regarding Strategy’s business model is intensifying due to its stock price trending negative for the year, some analysts, including Lance Vitanza from TD Cowen, believe the fears surrounding the company’s debt strategy may be exaggerated. Despite Strategy’s significant issuance of debt to finance its Bitcoin acquisitions, Vitanza noted that none of the bonds mature until 2028, making it “highly unlikely” that the firm will need to sell Bitcoin to fulfill its obligations. Furthermore, since preferred shareholders are not legally entitled to dividend payments, the credit default risk associated with these shares remains minimal. Vitanza likened the projected annual dividend burden of $735 million as manageable.
Market trends reflect a growing pessimism surrounding Bitcoin’s future price trajectory, with a prediction market indicating that 60% of respondents anticipate Bitcoin’s next significant price movement to be a drop to $85,000 rather than a rise to $115,000. This shift in sentiment contrasts sharply with the optimism expressed just a week prior, underscoring the volatile nature of cryptocurrency markets.
