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The share price of MicroStrategy stock (MSTR) plunged 8% after the firm purchased $209 million worth of Bitcoin (BTC) amid growing concerns of the company’s “leveraged” play.
MSTR lost over $27 during yesterday’s trading session, according to data from Google Finance. The bleed continued during after hours trading, with MicroStrategy stock dropping an additional 3%.
MicroStrategy Stock Heavily Leveraged Through Convertible Notes And Debt Issuances
The Kobeissi Letter shared concerns about MicroStrategy’s proposed 10 billion increase in authorized shares in a Dec. 30 X post. According to the trading resource, MSTR has heavily leveraged itself through a mix of convertible notes and debt issuances.
Something doesn't add up here:
MicroStrategy, $MSTR, has been known as the most popular "levered" #Bitcoin play of the year.
Meanwhile, over the last month Bitcoin has gained +2% while $MSTR is currently down nearly -50%.
What is happening? Let us explain.
(a thread)
— The Kobeissi Letter (@KobeissiLetter) December 30, 2024
In order for MicroStrategy to keep up its Bitcoin buying spree, it will need to issue even more debt or equity. If the company’s request to increase the amount of authorized shares is approved, the total number of shares “would rise from 330 million to 10.33 billion,” according to The Kobeissi Letter.
In such a case, MicroStrategy could find itself in a “lose-lose” situation, The Kobeissi Letter warned.
Analyst Warns MSTR Will Eventually “Implode”
Hartman Capital founder Helix Hartmann predicts MicroStrategy’s stock will “eventually implode.”
My take on Saylor/MSTR: It will eventually implode, but most shorts will time it wrong and blow up betting against BTC and MSTR.
Key points:
• Much of MSTR’s debt is near 0% interest, with maturities spread between 2027–2030, so neither servicing nor re-payment are near-term…
— Felix Hartmann (@FelixOHartmann) December 30, 2024
He added that MicroStrategy will “eventually go bankrupt,” but added that MSTR will become a top 5 company by market cap before this anticipated implosion.
Hartmann went on to predict that the software firm will likely go bankrupt between 2028 and 2029. He did, however, share a counterargument. In an alternative case, he believes that MicroStrategy will be able to comfortably repay the $1-4 billion of 2027-2029 maturities if a “raging bull” market boosts BTC’s price, leaving MicroStrategy with a $300 billion stockpile.
In the last 24 hours, Bitcoin’s price dropped over 1% to trade at $92,648.23 as of 1:32 a.m. EST. Despite the correction, BTC is still up more than 119% year-to-date. This has benefitted MSTR, which has risen more than 342% over the same period.
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