MicroStrategy announced today that it spent nearly $1 billion to purchase an additional 10,624 BTC, bringing its total Bitcoin holdings to 660,624 BTC.
The transaction comes amid mounting pressure on MicroStrategy chief Michael Saylor, who has been under pressure during the market downturn due to weak Bitcoin prices.
MicroStrategy continues buying despite criticism
Saylor continues to expand MicroStrategy's Bitcoin holdings despite the company facing criticism for its approach.
Bitcoin price has weakened over the past two months, failing to reclaim the $100,000 mark lost in November and currently trading around $89,950.
MicroStrategy, now a Bitcoin-focused fund rather than a traditional software company, has been hit hard as its value fluctuates with Bitcoin's volatility, creating ongoing difficulties.
However, the company continues to make new purchases . Notably, they did not buy during the recent drop to $86,000 last weekend, but only announced the latest purchase when Bitcoin temporarily recovered to $90,615.
Some XEM the move as a way to motivate supporters and maintain excitement among loyal investors. However, some analysts believe MicroStrategy's ability to fund further Bitcoin purchases is waning.
Pressure from Capital formation and new challenges
Analyst Novacula Occami noted that in this latest round, MicroStrategy was only able to sell $44 million in preferred stock last week, a very small amount compared to previous Capital .
This suggests the market may be less willing to lend or buy their preferred shares.
Because leverage is becoming more challenging , MicroStrategy is turning to common stock. In this case, they sold 5.1 million shares of MSTR at $181 each, diluting the existing shares.
Given MicroStrategy's current state, this approach may soon become unsustainable.
MicroStrategy's market Capital fell below $1 before recovering. Source: Saylor TrackerChallenges in asset value and market
MicroStrategy suffered a severe shock in early December when its market Capital temporarily fell below the net value of its Bitcoin holdings, raising new concerns about leverage, liquidation , and investor confidence.
The stock price has fallen to $156, reducing the company's value to $45 billion. Meanwhile, the value of MicroStrategy's Bitcoin is estimated at $55.2 billion, marking a rare period when the market values the company below its intrinsic value.
MicroStrategy has regained its footing, but if its stock trades below its asset value again, issuing new shares will become more difficult and less efficient.
As leverage continues to decline and stock dilution becomes unsustainable, MicroStrategy may face a point where it cannot raise enough Capital to continue its accumulation model.
