Strategy Acquires 4,000 Bitcoin Worth $450 Million
Strategy has recently acquired 4,000 Bitcoin valued at $450 million, primarily funding this latest purchase through the issuance of common shares, as stated in a press release.
The firm, based in Tysons Corner, Virginia, now holds approximately 636,500 Bitcoin, which is equivalent to about $70.6 billion. In comparison, Strategy has raised $425 million from the sale of common stock, while preferred shares contributed $46.5 million.
Strategy has developed numerous strategies to finance its Bitcoin acquisitions, but has typically relied on common shareholders to expand its holdings. This approach has recently garnered significant attention as the company has updated its corporate strategy.
The Bitcoin investment firm altered a self-imposed rule that had prevented it from diluting common shareholders when its stock was traded at less than a 2.5x premium to its Bitcoin assets. While this change was made to demonstrate fiscal discipline, the revised policy allows Strategy to issue common shares “when otherwise deemed advantageous.”
As of Monday, Strategy’s shares were trading at approximately $346, according to Yahoo Finance. The company’s stock has declined nearly 5.5% from $372 over the last month. In November, the stock price surged as high as $543 following the U.S. presidential election.
In a note released on Monday, analysts from investment bank Benchmark recognized the unease among retail investors. However, they asserted that concerns regarding Executive Chairman and co-founder Michael Saylor’s management of Strategy are unfounded.
“Amid a proliferation of Bitcoin strategy companies, MSTR remains the industry standard and benchmark,” they noted, while maintaining a “Buy” rating and a price target of $705.
Referred to informally as Strategy’s multiple-to-net asset value, the firm’s mNAV was 1.5x on Monday, according to Saylor Tracker. Over the past year, Strategy has traded as high as a 3.9x premium to its Bitcoin assets, but this ratio has been on a downward trend for several months.
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Benchmark analysts mentioned that Strategy’s self-imposed limitations may have initiated a “chain reaction.” As the company’s mNAV began to decline last month, the market interpreted this shift as an unfavorable sign for its Bitcoin purchasing capabilities, leading to a cycle of “premium compression begetting more compression.”
While the firm’s original intent may have been to support its mNAV, the decision became “counterproductive by starving the program of cheap capital,” the analysts added.
The updated guidance on common stock issuance reflects Strategy’s “iterative and opportunistic” approach to purchasing Bitcoin since its inception in 2020, according to Benchmark analysts, who characterized the return to normalcy as “not a capricious decision.”
Although Strategy’s stock price has fluctuated in recent weeks, its inclusion in the S&P 500 could result in billions in passive demand for its shares, according to Benchmark analysts. The company has met all the necessary qualifications for the index’s rebalancing this month, with an announcement anticipated on Friday.
While crypto-centric firms such as Coinbase have already been included in the index, analysts noted that the S&P Index Committee might assess Strategy differently, given that the majority of the company’s income has stemmed from fluctuations in the value of its Bitcoin holdings.
