MicroStrategy’s Stock Plummets Amidst Crypto Market Rout
Shares in the business intelligence and Bitcoin investment firm have tanked more than 11% over the past day, falling to $250 in after-hours trading, according to Google Finance.
Company’s Stock Down 13.5% Since the Beginning of the Year
The company’s stock (MSTR) has been battered recently by a crypto market rout that wiped out more than $270 billion over the past couple of days. Since the beginning of this year, the stock has fallen 13.5%.
Founder Michael Saylor Jokes About Needing a Second Job to Acquire More Bitcoin
In a recent tweet, founder Michael Saylor joked about needing a second job to acquire more Bitcoin as the asset crashed to a three-month low of $86,000 on Tuesday. He tweeted, "Considering a second job to acquire more Bitcoin."
Forced Liquidation Potential?
The Kobeissi Letter reported that Strategy stock had fallen more than 55% from its all-time high, prompting concerns about the possibility of a "forced liquidation." This scenario could become a reality if Bitcoin prices fall below the firm’s average cost to acquire it, currently $66,380 per BTC.
Strategy’s Massive Bitcoin Stash
Strategy’s 499,096 BTC stash is currently worth $44.3 billion and is still in profit by almost 34% despite its last twelve purchases and every Bitcoin buy since November 25 being at a loss. However, the company has been buying BTC for years, and there have been multiple bear markets since then, including the 2022 bear market that saw the asset fall from around $69,000 to $16,000.
Debt and Potential Liquidation
The company’s system is largely contingent on the ability to raise additional capital, but this ability could deteriorate if their liabilities rise significantly higher than their assets. However, most debt is in convertible notes with conversion prices below the current share price, and the majority of debt doesn’t mature until 2028. A forced liquidation would require a fundamental change at the company needing shareholder approval or corporate bankruptcy.
Saylor’s Control
As Michael Saylor holds 46.8% of voting power, shareholder-driven liquidation is highly unlikely.
Market Meltdown Natural
According to Bitwise Invest CIO Hougan, the current market is digesting the end of the meme coin boom and the Lazarus Group using memecoins to launder stolen ETH. However, he believes that there are already things ready to replace it, including institutional adoption of Bitcoin, stablecoins, tokenization, and a rebirth in DeFi. He said, "But until they start making their presence felt, the loss of energy will create a drag on the market."
Conclusion
The recent market rout has led to a significant decline in MicroStrategy’s stock, with shares falling over 11% in a day. The company’s massive Bitcoin stash is still in profit, but the potential for forced liquidation remains a concern. The market is currently digesting the end of the meme coin boom and the potential for a rebirth in DeFi, but until then, the loss of energy will create a drag on the market.
FAQs
Q: What has happened to MicroStrategy’s stock?
A: The company’s stock has fallen over 11% in the past day, down to $250 in after-hours trading.
Q: How much has the company’s stock fallen this year?
A: The company’s stock has fallen 13.5% since the beginning of the year.
Q: What did founder Michael Saylor say about needing a second job to acquire more Bitcoin?
A: He joked about needing a second job to acquire more Bitcoin as the asset crashed to a three-month low of $86,000 on Tuesday.
Q: What is the potential for forced liquidation at MicroStrategy?
A: The company’s system is largely contingent on the ability to raise additional capital, but this ability could deteriorate if their liabilities rise significantly higher than their assets. However, most debt is in convertible notes with conversion prices below the current share price, and the majority of debt doesn’t mature until 2028. A forced liquidation would require a fundamental change at the company needing shareholder approval or corporate bankruptcy.
Q: What is the current market situation?
A: The market is currently digesting the end of the meme coin boom and the potential for a rebirth in DeFi.
