As the pro-Bitcoin (BTCUSD) regime of President Donald Trump takes hold, the good times for the world's largest cryptocurrency look set to continue. After more than doubling in 2024, Bitcoin is currently trading near its all-time high.
Thus, as bullish sentiments around Bitcoin remain, investors may seek different avenues to gain exposure to it. Although direct holding and spot exchange-traded funds (ETFs) remain the preferred form of investing in “digital gold,” some investors are looking for other options.
This is where the shares of the world’s largest corporate Bitcoin holder come in, and its latest move may just be apt for market participants who are looking for regular income while also enjoying the upside of Bitcoin at the same time.
About MicroStrategy Stock
Founded in 1989, MicroStrategy (MSTR) is an enterprise analytics and mobility software company, now renowned for its significant investments in Bitcoin. In recent years, the company has garnered attention for adopting Bitcoin as its primary treasury reserve asset, positioning itself as the world’s first and largest Bitcoin Treasury Company.
Valued at a market capitalization of $81.5 billion, MSTR stock has outperformed Bitcoin by a wide margin over the past year with a staggering rise of 564%.
Preferred Stock Issue to Buy Bitcoin
After fortifying its Bitcoin reserve recently, taking its total value of Bitcoin held to more than $50 billion and a total of 471,107 BTC, MicroStrategy is going the preferred stock route to buy more Bitcoin in the future.
The company raised over $563 million by offering perpetual preferred stock that began trading on the Nasdaq Exchange on Friday, Jan. 31 under the ticker STRK. Priced at $80, the 10% yield offered is better than that on preferred stock of most of the major banks and also of the iShares Preferred & Income Securities (PFF), which has a yield of 6.2%.
Notably, each preferred share carries the option to convert into one-tenth of a share of Class A common stock with a conversion price of $1,000 per common share — a substantial premium to the current trading level. Unlike traditional preferred shares that often include call provisions allowing the issuer to redeem them at a set price, these preferred shares lack such a mechanism, granting holders the ability to retain them indefinitely. Conversion would only be triggered under specific circumstances, such as a significant reduction in the total outstanding preferred shares. This structure provides long-term flexibility for preferred shareholders while reinforcing the company’s commitment to maintaining capital stability.
About the issue, Executive Chairman Michael Saylor said, "It’s an opportunity to attract a new class of investors” as the company looks to diversify its funding sources to buy Bitcoin.
Shaky Financials
MicroStrategy’s financial position remains precarious, underscored by a lack of consistent profitability over the past decade and a compounded annual decline in sales of 22% during that period. The company recently missed analyst expectations, reporting a 10.3% year-over-year revenue drop to $116.1 million and widening losses to $1.72 per share, up from $1.01 per share in the prior year.
In the third quarter, operating expenses skyrocketed by 300% to $514.3 million, largely due to impairment losses on its digital assets. The company’s cash reserves dipped slightly to $46.3 million, almost equal to its short-term debt of $46.2 million, highlighting liquidity concerns.
While MicroStrategy has significantly increased its Bitcoin holdings over the past year, this strategy has raised questions about its funding sources. The company sold around 8 million Class A shares in the third quarter, generating approximately $1.1 billion. However, this came at the cost of ballooning its long-term net debt to $4.2 billion, up from $2.2 billion a year earlier. Management plans to continue this aggressive approach with its “21/21 Plan,” targeting $21 billion in equity and another $21 billion in debt to fund further Bitcoin purchases.
Given these financial strains, coupled with falling revenue and escalating losses, MicroStrategy’s financial outlook appears fraught with risk.
Strategic Initiatives
MicroStrategy’s unwavering focus on Bitcoin has been both its greatest strength and its biggest risk. While price volatility and regulatory uncertainty loom, the company’s massive Bitcoin holdings have propelled its stock performance and secured its inclusion in the prestigious Nasdaq-100 Index ($IUXX).
However, this extreme Bitcoin-centric strategy carries substantial risks. MicroStrategy has effectively sidelined its core software business, rebranding itself as a “Bitcoin Treasury Company.” A sharp drop in Bitcoin’s price — especially below $65,000 (roughly around its average per-BTC purchase price) — could severely undermine its leveraged approach. Moreover, its reliance on convertible debt adds another layer of vulnerability. If the stock price falls below conversion thresholds, the company may face pressure to raise capital to cover its debt obligations, potentially triggering a liquidity crisis.
What Do Analysts Think About MSTR Stock
Analysts are highly bullish on MicroStrategy, with 10 analysts rating it a “Strong Buy” with a mean target price of $555.89. This implies upside potential of 60% from current levels.
