Why Shares of Strategy Fell 14.6% This Week

Core Insights - The Bitcoin investment vehicle is experiencing a decline alongside broader cryptocurrency prices [1] - Strategy (formerly MicroStrategy) shares fell 14.4% this week, reflecting the drop in Bitcoin prices, which briefly fell to around $80,000 before recovering to $85,000 [2] - Year-to-date, Strategy's stock is down 43%, while Bitcoin has only decreased by 10% [5] Company Performance - Strategy's market cap is currently $51 billion, with shares trading at $170.50, down from a 52-week high of $457.22 [4] - The company has raised its shares outstanding by 199% over the last five years to fund Bitcoin purchases, resulting in a 667% increase in stock price during that period [4] - The gap between Strategy's stock price and its underlying Bitcoin net asset value (NAV) is narrowing, complicating future fundraising efforts [5] Funding and Financial Strategy - With falling cryptocurrency prices, Strategy is finding it increasingly difficult to raise funds through stock offerings, leading to alternative funding sources [6] - Recently, the company sold preferred stock to raise $700 million, which will increase its cash reserves but also its cost of funding due to a 10% annual interest payment [6] Investment Considerations - The current valuation of Strategy may present a more compelling investment opportunity as the gap between its stock price and underlying assets has closed [8] - However, investing in Strategy may be less straightforward than directly purchasing Bitcoin, given the complexities of its debt and preferred stock structure [9]