MicroStrategy Inc. (NASDAQ: MSTR) is the largest known private holder of bitcoin. And with what seems to be more stock and convertible debt offerings each month, Michael Saylor and his team keep acquiring more and more bitcoin.
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The good news is that MicroStrategy is still in a net-net profitable position measured in billions of dollars. The bad news is that bitcoin’s current spot price has fallen under $90,000 and outflows from bitcoin ETFs put the company in a potential bind if the trends continue.
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There is a scenario where MicroStrategy (and smaller companies like it) will no longer have favorable pricing access to the capital markets. This scenario should not be considered as definite at all, but to ignore it is a huge financial gamble.
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After a fresh $2 billion convertible note offering was priced, a corporate SEC filing showed that it had acquired approximately 20,356 bitcoins for approximately $1.99 billion in cash during the period between February 18 and February 23 (2025). This comes to an average of approximately $97,514 per bitcoin after fees and expenses.
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Where investors are more likely to focus during a significant sell-off is what the MicroStrategy dollar-cost-average is now that the company has demonstrated it wants to keep adding bitcoin to its treasury. As of February 23, 2025, MicroStrategy holds approximately 499,096 bitcoins — valued at an aggregate purchase price of approximately $33.1 billion with an average purchase price of approximately $66,357 per bitcoin.
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Michael Saylor has offered his opinion about how raising capital in the public markets is long-term accretive rather than dilutive to existing shareholders. After all, if the price of Bitcoin keeps rising then the profits and asset value accumulation down the road justified the additional shares and convertible notes.
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As long as MicroStrategy’s average purchase price remains below the current price, MicroStrategy’s long-term business case remains quite feasible. Even if they are down from more recent purchases at higher prices, it’s still a net gain overall based on market conditions. And we all know that the MicroStrategy endgame is really based on the belief that Bitcoin will be worth much more in the future than it is today.
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Now imagine what would likely be the capital markets’ views if MicroStrategy’s bitcoin cost average keeps rising from additional Bitcoin purchases and then bitcoin’s spot price keeps falling after those purchases?
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This is of course hypothetical, but an average cost of $75,000 to $80,000 per bitcoin with much larger holdings (call it 700,000 bitcoins) would look like a financial disaster if bitcoin’s spot price was to plunge back down to $60,000 or lower.
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The latter scenario is one where things become difficult for management to explain. At that point, the presentations are not coming from a position of strength nor from a position of gains. Being the smartest person in the room, or just the largest holder in the room, doesn’t sound as sophisticated and righteous when the entire effort is worth 20% to 30% less than the value at that given time.
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MicroStrategy’s close on Monday had the shares down 5.6% at $282.76, and its market cap was $73 billion. The shares have traded in a range of $84.18 to $543.00 in the last year. With volatility like this, it’s easy to see why so many of the other crypto leaders are finding their stocks caught between a rock and a hard place.
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Please note — Oggonomics maintains no active price targets or ratings on MicroStrategy, bitcoin, alt-coins and other public miners and crypto-centric companies.
