Key Insights
- MSTR stock plummeted to its lowest level since 2024.
- The crash intensified after its preferred stocks fell below par.
- Michael Saylor faces little options to boost investor confidence.
The MSTR stock price has continued its strong downward trend this month, reaching its lowest level in years. This retreat has coincided with the ongoing Bitcoin retreat and the ongoing woes in its preferred stocks like STRC and STRD. Sadly, there is fear that Michael Saylor’s options are narrowing, which may lead to lower prices.
Michael Saylor’s Business Model is Being Questioned
Strategy, previously known as MicroStrategy, is facing a huge problem, thanks to a change in its business model in the past 12 months. In this period, the company launched several preferred stocks vehicles to help it boost its Bitcoin purchases. These vehicles include STRC, STRK, and STRD.
Retail and institutional investors allocated funds in these assets because of the promise of high dividends. All of them are paying over 9% in annual returns, higher than short-term government bonds and other income assets.
The challenge, however, is that Strategy’s operations don’t generate substantial income. Bitcoin, unlike other cryptocurrencies like Ethereum, does not pay any return. Its software business made $477 million in revenue last year, with the company recording a $12 billion net loss.
Therefore, Strategy uses its at-the-market (ATM) offerings to fund dividends to its preferred stockholders. Recently, however, there are concerns about whether it has enough cash to fund its dividends in the long term.
Its cash situation worsened in May when it paid $1.5 billion to its creditors. It now has $1.4 billion in cash after adding $300 million a week ago. These funds are not enough to cover 12 months of its dividend liabilities.
Strategy Has No Good Options
The company has no good option to raise capital for now. First, it can issue debt, but with the current state of its business, the interest rates demanded will be enormous. It already sits on $6.7 billion in debt.
Second, the company can continue with its ATM issuances. While this is a cheap way of raising capital, it means that its investors will endure more pain of dilution. Besides, the company has already hiked its outstanding shares from 83 million in 2021 to 326 million today. More dilution will push its stock price lower.
Third, the company may decide to sell some of its Bitcoin to cover the payments. Besides, its Bitcoin holdings are now valued at over $51 billion. Selling Bitcoin worth $5 billion may help it to cover its payouts for nearly 3 years. In theory, such a move would help its preferred stocks move to par.
However, this option is also risky, as we saw earlier this month, when the company tested the market by selling 32 coins. In the aftermath, Bitcoin plunged below $60,000 for the first time in two years.
In a recent note, Peter Schiff warned that selling BTC would lead to more declines. He also warned that pausing BTC purchases would affect Bitcoin prices in the near term.
MSTR Stock Price Technicals Point to More Dips
The weekly chart shows that the Strategy stock price has slumped in the past few months. It recently dropped below the crucial support level of $103, its lowest level on February 2nd.
The stock has also dived below the 61.8% Fibonacci Retracement level of $216, confirming the bearish outlook. Also, it has dived below the 50-week and 100-week moving averages.
Therefore, the path of the least resistance for the shares is bearish as its STRC and STRD woes continue. If this happens, the next key level to watch will be at $50. The bearish forecast will become invalid if it jumps above the key resistance level of $100.
Crispus is a distinguished Financial Analyst at, bringing over 12 years of expertise in cryptocurrency markets, specializing in Bitcoin and altcoins. Renowned for his sharp insights at the nexus of market trends and breaking news, Crispus delivers actionable analysis to empower investors. His work is prominently featured across leading platforms, including BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com, cementing his reputation as a trusted voice in the financial world.
