The Fundamental Problem With MicroStrategy's Bitcoin-Buying Plan

Core Viewpoint - MicroStrategy, now rebranded as Strategy, has seen significant stock price increases largely due to its bullish stance on Bitcoin and substantial holdings of the cryptocurrency [1][5]. Group 1: Company Position on Bitcoin - Strategy is the largest corporate holder of Bitcoin, with 582,000 Bitcoins as of June 9 [4]. - The company plans to raise up to $42 billion over three years to increase its Bitcoin holdings through debt and equity [4]. - The stock has risen over 3,000% in five years, while Bitcoin has increased by approximately 970% [5]. Group 2: Financial Implications of Bitcoin Holdings - Strategy's average cost for Bitcoin purchases is around $70,000, and it has bought Bitcoins even when prices exceeded $100,000 [6]. - The company has burned through over $84 million in operational cash flow in the past year, with total cash outflow exceeding $28 billion when including Bitcoin investments [8]. Group 3: Investor Considerations - Ongoing capital raises may dilute existing shareholders, creating a cycle of stock offerings and Bitcoin purchases [7]. - Investors might find it more beneficial to invest directly in Bitcoin rather than through Strategy, especially as more companies enter the Bitcoin market [9]. - The current valuation of Strategy exceeds $100 billion, raising concerns about the sustainability of its stock performance without stronger fundamentals [10].