MicroStrategy Stock Tumbles Over 4% In Thursday Premarket: What's Going On?

Shares of MicroStrategy Inc. MSTR dropped by 4.08% following the company’s announcement to issue more shares to finance additional Bitcoin BTC/USD acquisitions. This move aligns with MicroStrategy’s ongoing strategy to bolster its Bitcoin reserves.

What Happened: MicroStrategy’s recent filing with the U.S. Securities and Exchange Commission (SEC) aims to expand the authorized number of Class A common stock from 330 million to 10.33 billion units and preferred stock from 5 million to over 1 billion units. This move underscores the company’s transition from a software enterprise to a major Bitcoin investor.

The company recently acquired $561 million worth of Bitcoin, marking its seventh consecutive week of purchases, with total holdings now estimated at $40 billion. Despite Bitcoin’s 135% increase this year, market volatility is expected as $43 billion in Bitcoin and Ether derivatives are due to expire on Friday.

Meanwhile, Bitcoin Thursday during pre-market hours was trading at $95,621.41. The cryptocurrency briefly hit an intraday peak of $99,876.70. A broader cryptocurrency index, which includes tokens such as Ethereum ETH/USD, Solana SOL/USD, and Dogecoin DOGE/USD, also experienced a minor recovery, rising by 0.2%.

Why It Matters: MicroStrategy’s decision to issue more shares comes on the heels of its recent inclusion in the Nasdaq 100, which has not been without challenges. The company’s stock fell over 8.5% on its debut in the index, marking a difficult start to its tenure. Over the past month, MicroStrategy’s stock has plunged more than 37% from its all-time high, reflecting investor concerns over its aggressive Bitcoin strategy. The company’s recent sale of $561 million in common stock to purchase an additional 5,262 Bitcoins at an average price of $106,662 per coin has further intensified scrutiny.

The latest analyst ratings for MicroStrategy Inc were issued by Bernstein on Dec.12, and by both TD Cowen and Barclays on Nov. 25. These analysts, tracked by Benzinga, have set an average price target of $546.67, suggesting a potential upside of 58.01% for the stock.