Strategy Falls 15% in a Month: Hold or Fold the MSTR Stock?

What Happened?

Shares of business analytics software company MicroStrategy (NASDAQ:MSTR) fell 3.2% in the morning session after a nearly 4% drop in Bitcoin's price weighed on crypto-related stocks, amid growing concerns over the company's valuation and fundamentals. The downturn in Bitcoin was linked to a hotter-than-expected Producer Price Index (PPI) report, a key measure of inflation that can influence investor sentiment towards riskier assets. This macro news compounded existing investor worries specific to Strategy.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy MicroStrategy? Access our full analysis report here, it’s free.

What Is The Market Telling Us

MicroStrategy’s shares are extremely volatile and have had 77 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was about 21 hours ago when the stock dropped 4.6% on the news that markets pulled back as a hotter-than-expected wholesale inflation report for July dampened hopes for a Federal Reserve interest rate cut. The U.S. Producer Price Index (PPI), a key measure of wholesale inflation, rose 0.9% month-over-month in July, far exceeding the 0.2% increase that economists had predicted. Annually, prices at the wholesale level jumped 3.3%, also surpassing the 2.5% forecast. This hotter-than-expected data has poured cold water on widespread expectations for an interest rate cut from the Federal Reserve next month. Persistent inflation makes it less likely for the central bank to ease monetary policy. Sectors with high-growth stocks, such as SaaS, are particularly sensitive to interest rate changes, as the prospect of higher rates for longer can diminish the present value of their future earnings, leading to a decline in stock prices.

MicroStrategy is up 20.4% since the beginning of the year, but at $361.16 per share, it is still trading 23.8% below its 52-week high of $473.83 from November 2024. Investors who bought $1,000 worth of MicroStrategy’s shares 5 years ago would now be looking at an investment worth $25,108.

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Wall Street debates Strategy's Bitcoin blueprint originally appeared on TheStreet.

One of Wall Street's most famous short sellers, Jim Chanos, has made a name for himself by finding firms whose market value is way higher than it should be. Now, his eyes are set on MicroStrategy, a Virginia-based software company that has lately changed its name to "Strategy."

The company is well known for its corporate Bitcoin vault. But Chanos is clear in his criticism: the company's business model is "financial nonsense," and its shares are worth a lot more than the Bitcoin they represent.

Chanos's main point is based on a single number: market net asset value, or mNAV. This represents the value of the company's Bitcoin holdings per share, minus its debts and preferred equity, relative to the actual stock price.

Strategy now has around $77.2 billion worth of Bitcoin. However, the price of its shares suggests that each share is worth significantly more than the coins themselves. Traders call that extra gap the "premium," and Chanos thinks it's not fair.

Join the discussion with Scott Melker

Strategy's premium has been under both scrutiny and praise. The corporation doesn't just use cash reserves or issue traditional debt to get money. It also sells perpetual preferred shares, such as its STRD ("Stride") and STRC ("Stretch") offerings.

Investors in these preferreds receive regular dividends, typically ranging from 9% to 12%, which Strategy uses to purchase additional Bitcoin.

The method gives investors more power: when the market is strong, the extra Bitcoin raises returns for regular stockholders. But in poor markets, those fixed dividend obligations stay in place, which might lower value and force Strategy to keep raising money.

In favor of MSTR

Michael Saylor, the executive chairman of Strategy and the person who came up with this plan, says the extra money is well worth it. He talks about it in terms of four main benefits.

Bitcoin (BTC-USD) rose over 1% Thursday to just above $121,655 after hitting a record $123,500 Wednesday, driven by institutional demand and bets on looser monetary policy.

The cryptocurrency has gained 31% year-to-date and is up 60% from April’s market lows.

Inflows into spot exchange-traded funds, along with purchases from public companies copying the blueprint of software firm-turned-bitcoin juggernaut Strategy (MSTR) by adding bitcoin to their balance sheets, have been key drivers of this year’s token rally.

Strategists also point to the Trump administration’s pro-crypto stance as a major catalyst.

"The administration is pushing crypto. They are pushing bitcoin. Bitcoin is the lead dog in the crypto market," Tom Essaye, founder of Sevens Report Research, told Yahoo Finance earlier this week.

"So is it short-term a little frothy? Sure," he added. "But longer term, there are some fundamental changes here that I think are bullish for it and we'll send it much higher in the future."

Last week, President Trump issued an executive order directing the Labor Department to explore allowing 401(k) plans to hold cryptocurrencies and other alternative assets, a move that could significantly expand retail access to crypto.

The price surge also comes as US equities have notched all-time records on expectations the Federal Reserve will cut interest rates in September, and that Trump’s next Fed chair pick will likely favor looser monetary policy.

Meanwhile ethereum (ETH-USD) prices rose to near record levels on Wednesday as Wall Street grows increasingly bullish on the world's second-largest cryptocurrency by market cap.

Ethereum's native token, ether jumped as much as 6% to hover above $4,700 per token, just shy of its 2021 record highs.

Companies have been adding ether to their balance sheets as a way to gain exposure to the tech infrastructure behind decentralized finance and digital assets, such as stablecoins.

This week Bitmine Immersion Technologies (BMNR), an ethereum treasury company, announced plans to sell up to another $20 billion worth of stock to boost its holdings of the cryptocurrency.

"We have stated multiple times we believe Ethereum is the biggest macro trade over the next 10-15 years," Fundstrat head of research Tom Lee, who also serves as chairman of Bitmine, wrote in a note Wednesday.

Lee noted the majority of Wall Street crypto projects and stablecoins, or digital tokens backed by assets like the US dollar, are being built on the ethereum infrastructure.

Ether, the native token of ethereum, is up more than 50% since the GENIUS Act legislation, which creates guardrails for the stablecoin industry, was passed last month.

Cryptocurrency has come a long way since Bitcoin’s debut in 2009. Over the past decade and a half, the space has captured global attention, dominated headlines, and gone through wild cycles of boom and bust. Today, thousands of cryptocurrencies circulate on the market, and while global regulation is still taking shape, under the new administration the U.S. framework is advancing rapidly in a distinctly positive direction.

Elevate Your Investing Strategy:

For investors looking to cut through the noise, one compelling option lies in Bitcoin treasuries. These are public companies that hold Bitcoin as a strategic asset, aiming to benefit from its long-term value appreciation.

Covering the sector for Cantor, analyst Brett Knoblauch gives us the background and points the way toward finding sound investments.

“What makes a good Bitcoin treasury company? A successful Bitcoin treasury company needs access to capital. Without capital, they simply cannot acquire Bitcoin. The amount of capital a company has access to in this space is largely driven by trading liquidity. For shares to have a relatively high amount of volume, we believe they need to have a management team that carries weight in the crypto ecosystem,” Knoblauch opined. “However, not all Bitcoin treasury companies are created equal, and we believe some offer better risk/reward than others.”

The Cantor digital expert goes on to put his background research to work – and he’s tagged Strategy (NASDAQ:MSTR) and Semler Scientific (NASDAQ:SMLR) as two of the best bitcoin treasury stocks to buy right now. Let’s give them a closer look and find out what makes these stocks so compelling.

Strategy

The first stock on our list is MSTR. Formerly known as MicroStrategy, the company rebranded itself earlier this year as Strategy, and its stylized ‘B’ logo points to the company’s core work. Strategy is a Bitcoin treasury, but more importantly, it was the first Bitcoin treasury. The company has been buying up Bitcoin since 2020, and today its holdings total 607,770. At current prices, that digital asset is worth approximately $72 billion. Strategy is the world’s largest corporate holder of Bitcoin.

As a Bitcoin treasury, some of Strategy’s vital stats are a bit different than those of most other public companies. A look at the last quarterly report, covering 1Q25, shows this. Strategy reported strong results on several important KPIs related to its Bitcoin business. These include the ‘BTC Yield,’ which was listed as 13.7%; the ‘BTC Gain’ of 61,497; and the ‘BTC $ Gain’ of $5.8 billion. These performance indicators were given ‘year-to-date,’ as of April 28, and show that Strategy’s bitcoin treasury business was performing well in the first four months of this year.

(Bloomberg) -- Michael Saylor isn’t backing down. The Strategy co-founder is preparing to sell $4.2 billion more in preferred stock to fuel his latest Bitcoin bet — while throwing a lifeline to investors worried he’s diluting them into oblivion.

The plan, unveiled with second-quarter earnings on Thursday, is Saylor’s latest answer to the big question hanging over his stock: how long can he keep using a lofty premium to fund ever-larger Bitcoin buys?

To reassure shareholders, Strategy pledged it won’t issue new common shares at less than 2.5 times its net asset value, except to cover debt interest or preferred dividends. At the same time, Saylor will keep tapping the market “opportunistically” when the premium is high, turning equity sales into fresh Bitcoin buys.

The move does two things at once: it locks in a floor aimed at reassuring any skeptical shareholders and arms the company with a larger war chest to keep buying Bitcoin. It’s a double play that pits Saylor directly against hedge fund managers like Jim Chanos, who have been betting the company’s premium will collapse.

“That would put common shareholders who are concerned about potential dilution at ease,” said Brian Dobson, managing director for Disruptive Technology Equity Research at the brokerage firm Clear Street. “The market is reacting positively to Strategy’s equity products. The demand is there as evidenced by their substantial capital raises.”

It’s the latest in a string of financial maneuvers that have transformed a once-obscure software firm into a leveraged Bitcoin proxy.

The dual move showcases Saylor’s mastery of capital markets during these bullish digital-asset times: using a self-imposed floor to placate critics, while simultaneously arming the company with fresh ammunition to keep buying Bitcoin.

The company - which is known formally as MicroStrategy Inc. — has already raised more than $10 billion this year through stock and structured offerings, feeding a balance sheet now holding $74 billion in Bitcoin. Its stock has surged 3,300% since Saylor’s first crypto purchase, outpacing Bitcoin itself and forcing hedge funds into a high-stakes battle over whether his premium-fueled strategy can last.

Since Strategy’s first Bitcoin purchase in 2020, Saylor has sold equity, issued various types of debt and layered stacks of preferred shares on top. In the process, he has encouraged a fleet of imitators and spurred a new industry of public companies following a so-called treasury strategy dedicated to buying and holding cryptocurrencies.