The sharp decline in Bitcoin's price has had a significant impact on MicroStrategy, with its stock losing more than 55% of its peak value. Holding a substantial amount of BTC, the company finds itself in a challenging situation.
The MicroStrategy Dilemma: Hold or Sell?
According to an analysis by The Kobeissi Letter, MicroStrategy's stock has plunged more than 55% from its peak price. This raises concerns about the sustainability of the company's business model, which is highly dependent on Bitcoin.
Currently, MicroStrategy holds approximately 499,096 BTC with a total value of around $43 billion, acquired at an average price of $66,357 per coin. The question of whether the company will be forced to sell part of its Bitcoin holdings looms large, especially after the sharp drop in its stock price. The possibility of asset liquidation becomes more likely if the company's obligations significantly outweigh its assets. However, The Kobeissi Letter notes that this scenario is currently distant, as most of the company's debt is due to be paid by 2028.
Michael Saylor and His Strategy
Michael Saylor, the founder of MicroStrategy, remains steadfast in his belief that Bitcoin is the world's best asset. He has repeatedly supported his stance with new Bitcoin purchases, including a recent acquisition worth $2 billion.
The Kobeissi Letter analysis highlights that Saylor retains control over the company due to his majority voting rights in MSTR shares, making it difficult to alter strategies without his consent. This includes the potential sale of large amounts of Bitcoin. While MicroStrategy continues its strategy of buying Bitcoin funded by issuing debt and new shares, analysts question how long investors will continue to support such a strategy amid the ongoing decline in Bitcoin prices.
Bitcoin Crash Could Mean the End for MicroStrategy
Not only The Kobeissi Letter but also renowned analyst Peter Schiff questions the future of MicroStrategy, suggesting that the debt-based business model might collapse if Bitcoin prices do not recover. The issues lie not only in the plummeting price of Bitcoin but also in the drop in the company's stock value. Schiff's analysis suggests that if the company's shares trade at a significant discount to the value of its Bitcoin assets, financial pressure could increase drastically.
Peter Schiff believes that Saylor might attempt to sell some Bitcoin to buy back company shares and reduce the discount, leading to further pressure on Bitcoin and worsening MicroStrategy's financial situation.
Despite Michael Saylor's confidence in Bitcoin's future, MicroStrategy faces potentially dangerous financial challenges. Experts worry that if Bitcoin prices do not rebound, the company might encounter severe troubles.
