Bitcoin’s Slump: MicroStrategy’s Share Price Plunges 45% from November Peak

One of the hottest Bitcoin trades in 2024 is slumping into the New Year.

As of Thursday, MicroStrategy’s share price had fallen 45% from its November peak—sliding to $300 from a record price of $543 around six weeks ago.

MicroStrategy’s Bitcoin Holdings

The Tysons, Virginia-based software firm went gangbusters on Bitcoin last year, purchasing billions of dollars worth of the cryptocurrency using equity and debt. On Monday, the company topped off its stash of 446,400 Bitcoin, worth $43 billion, with a $200 million Bitcoin purchase.

Smaller Purchases, Prolonged Plunge

Since MicroStrategy’s share price peaked, the Bitcoin-buying behemoth has purchased BTC five different times, yet each purchase has gotten smaller. After purchasing $5.4 billion worth of Bitcoin on Nov. 25, for example, Monday’s buy represented its lightest allocation since August. That was not enough to staunch the stock’s prolonged plunge.

Rise of a Bitcoin Giant

MicroStrategy has solidified its status as the world’s largest corporate holder of Bitcoin—adopting the asset as a novel way to shore up its balance sheet in 2020—but the firm has also garnered attention on Wall Street more recently as a potentially risky leveraged Bitcoin bet.

Convertible Notes and Stock Price

By issuing $7.3 billion worth of convertible notes, a form of debt that can later be converted into shares, the company has been able to purchase more Bitcoin than it could otherwise. At the same time, the company’s valuation has ballooned past that of its $43 billion Bitcoin holdings, with a current market capitalization of $73.2 billion.

Premium on Stock Price

Investors have been paying a premium for Bitcoin exposure when it comes to MicroStrategy’s stock, which currently trades hands at 1.6x that of its Bitcoin holdings according to MSTR Tracker. While investors can get pure Bitcoin exposure through products like spot ETFs or by simply buying the asset itself, that premium hit 3.4x in November.

Bitcoin’s Rise and MicroStrategy’s Premium

MicroStrategy’s share price has risen 334% over the past year, outpacing Bitcoin’s 116% climb over the same period. That’s led Bernstein analysts to say MicroStrategy is “building a case” for its premium, alongside a proven ability to increase its Bitcoin holdings per share.

Implied Price of Bitcoin

With an implied price of $200,000 per Bitcoin for MicroStrategy shares, however, it appears that “stock investors are no longer willing to prop up MicroStrategy with an inflated” stock price relative to its Bitcoin holdings, 10X Research wrote in a Thursday note.

A Growing Reality Check

“The shift underscores a growing rationality among investors who previously bought into the unofficial narrative of MicroStrategy as ‘a leveraged Bitcoin play,’” 10X Research added.

Conclusion

In conclusion, MicroStrategy’s share price has plummeted 45% from its November peak, mirroring the slump in the company’s Bitcoin holdings. The company’s valuation has ballooned past that of its Bitcoin holdings, with a current market capitalization of $73.2 billion. As investors reassess their views on the company’s premium, it remains to be seen whether MicroStrategy can recover its losses and maintain its position as the world’s largest corporate holder of Bitcoin.

FAQs

Q: What is MicroStrategy’s current share price?
A: $300
Q: How much has MicroStrategy’s share price fallen from its November peak?
A: 45%
Q: What is the current value of MicroStrategy’s Bitcoin holdings?
A: $43 billion
Q: What is the company’s current market capitalization?
A: $73.2 billion
Q: What is the premium on MicroStrategy’s stock price?
A: 1.6x its Bitcoin holdings
Q: How has MicroStrategy’s share price performed over the past year?
A: It has risen 334%, outpacing Bitcoin’s 116% climb
Q: Is MicroStrategy’s premium sustainable?
A: The company’s valuation has ballooned past that of its Bitcoin holdings, but some analysts question whether the premium is sustainable