Monness Crespi analyst Gus Gala downgrades MicroStrategy, citing issues with the company's financing strategy due to limited funding sources.
Why is MicroStrategy’s Bitcoin Funding Strategy Under Scrutiny?
Monness Crespi analyst Gus Gala recently downgraded MicroStrategy (MSTR) to a 'sell' rating. The core issue lies in the limitations of funding sources. Gala points out that the company's methods for raising capital are depleting rapidly, which could hinder their aggressive Bitcoin accumulation strategies.
What are the Limits to MicroStrategy’s Bitcoin Treasury Strategy?
Under the leadership of Michael Saylor, MicroStrategy has amassed a substantial amount of Bitcoin, totaling 528,185 BTC. The company utilized common and preferred stock issuance to fund this accumulation. However, according to Gala, MicroStrategy has already tapped into $18.6 billion of a potential $21 billion, leaving only $2.4 billion available.
Could MicroStrategy Shift Away from its Bitcoin Investment?
If primary funding sources are limited, MicroStrategy might consider shifting to fixed-income instruments like issuing bonds or taking on loans. However, these measures come with risks, such as limiting the flexibility of the company’s treasury strategy and increasing financial risk.
The analyst's downgrade highlights issues in MicroStrategy's Bitcoin funding strategy and their impact on market sentiment. The company's future steps will be crucial indicators of their ability to adapt and continue their initial strategies.
