MSTR stock issuance dilutes Bitcoin per share
The bear case argued against MicroStrategy's equity strategy is that issuing common stock while trading below net asset value dilutes the amount of Bitcoin backing each share.
The argument
The guest argued that with the company trading at approximately 84% of its Bitcoin net asset value, issuing new shares to buy Bitcoin decreases the Bitcoin-per-share metric for existing shareholders. This acts as a hidden tax on investors, leaving them with less Bitcoin exposure per share when the market recovers.
The thesis, stress-tested
✓ What validates it
- ✓MicroStrategy continues issuing common stock while trading at a discount to its Bitcoin holdings
- ✓Quarterly reports show a decline in the Bitcoin-per-share metric
▸ Risks discussed
- ▸A rapid recovery in the price of Bitcoin could offset the dilutive effect
- ▸The market premium to net asset value could return, making future issuances accretive
Hear it yourself
"And I'm not predicting that it's gonna go further down. This may be the bottom. I'm just using all we've got, which is history to give us a guide because like I said, this is uncertain rather than a a probability that we can, sort of, know that probability ahead of time. Now so the the situation with the 32 Bitcoin so the the message given by Saylor about that was the purpose of it was, and I quote, to inoculate the markets. So if you think about that word inoculate, what does it really mean? Right? It means when you inoculate something, you're preparing it for a bigger event."
04:30
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE