Dilution risks cloud MicroStrategy's outlook
The speakers argued that MicroStrategy faces structural headwinds due to its high debt and preferred security service burden, which could dilute common shareholders if Bitcoin prices remain flat.
The argument
The guest noted that at current levels, the company's debt and preferred service obligations result in an estimated 6% annual dilution on common stock. While not facing immediate liquidation risks, the stock is expected to struggle to outperform Bitcoin and may trade at a persistent discount to its net asset value (NAV).
The thesis, stress-tested
✓ What validates it
- ✓MSTR common stock trading at a persistent discount to NAV
- ✓An upcoming dividend adjustment on preferred securities that fails to restore them to par
▸ Risks discussed
- ▸A massive surge in Bitcoin price that offsets the dilution drag
- ▸Successful issuance of more low-cost equity to cover cash flow obligations
Hear it yourself
"They are threading the needle here from a policy perspective in a lot of senses where the it's getting it's rotational. It's not like 2008 where you see credit spreads blow out. There's a massive crisis. Everything is going to different sectors. So that's sort of what I if you're if you're in the right sectors, like, industrials are crushing it, making new highs. Banks are crushing it, making new highs. It's all old school stuff. And one one of the guys I'm I'm about to have drinks with who watches the show, he said, just buy the old economy stuff. Trump loves the old economy, like Intel, IBM."
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