Strategy Barely Bought the Bitcoin Dip. Its Stock Is Getting Crushed.

Strategy co-founder Michael Saylor. (DOMINIC GWINN/Middle East Images/AFP via Getty Images)

Key Points

• Strategy stock falls following a sharp decline in Bitcoin over 24 hours.
• The company adjusts its year-end Bitcoin price assumption to a range of $85,000 to $110,000 from $150,000.
• Strategy said it bought 130 tokens in the period from Nov. 17 through Sunday.

After going a week without buying Bitcoin, Strategy made another purchase. The stock fell anyway.

In a securities filing Monday, the world’s largest corporate holder of Bitcoin disclosed that it had bought just 130 tokens in the nearly two-week period from Nov. 17 to Nov. 30.

The $11.7 million purchase brought Strategy’s total holdings to 650,000 Bitcoins, acquired for roughly $48.4 billion in total. The hoard was valued at $54.9 billion as of early Monday.

Strategy didn’t issue an update to its holdings on Nov. 24, indicating it didn’t buy any Bitcoin in the prior seven-day period and marking the first time in about a month and a half that it had stayed on the sidelines.

As he often does, Strategy chairman and co-founder Michael Saylor teased an upcoming purchase announcement in a social media post Sunday, suggesting the company might “start adding green dots” to a graph representing its Bitcoin holdings.

The news didn’t do much to hinder the shares’ continued losses. Strategy stock closed down 3.2% to $171.42 after earlier in the day being down 11%. The drop followed a sudden reversal in the price of Bitcoin that erased all of last week’s gains. The short-lived rebound came as Wall Street piled back into riskier assets, including technology stocks.

Other crypto-linked stocks were trading lower on Monday. Coinbase Global and Robinhood Markets dropped 4.7% and 4.1%, respectively. The S&P 500 declined 0.5%.

The broad declines mirrored a drop in the price of Bitcoin, which has slumped 7.6% over the past 24 hours to $84,399, according to CoinDesk. Bitcoin’s losses accelerated once its price broke below $90,000, which many analysts view as a key support level.

There was more to Strategy’s latest filing than an update on its holdings. The company said it had established a $1.44 billion reserve in U.S. dollars “to support the payment of dividends on its preferred stock and interest on its outstanding indebtedness.”

It remains to be seen whether this will assuage investor concerns. Many on the Street have questioned Strategy’s ability to service its preferred dividends and debt interest costs, seeing as its Bitcoin holdings generate no income and its legacy software business yields little free cash.

The reserve was funded using proceeds from the sale of common stock under Strategy’s at-the-market offering program. The company said it aims to maintain a reserve “in an amount sufficient to fund at least twelve months of dividends,” and ultimately intends to cover 24 months or more.

Separately, Strategy updated its fiscal 2025 guidance to reflect volatility. The company adjusted its year-end Bitcoin price assumption to a range of $85,000 to $110,000 from $150,000.

Based on this outlook, the company sees operating income ranging from a $7 billion loss to a $9.5 billion profit, and diluted earnings in the range of a loss of $17 a share to a gain of $19 a share. These figures are down considerably from an October forecast that called for a profit of $24 billion, or $80 a share.

Considering the recent instability and sour sentiment, it is easy to doubt the company. Famed short seller Jim Chanos ignited discourse last month when he shared that his firm, Kynikos Associates, had closed out its pair trade on Strategy. Chanos had shorted shares of MSTR and gone long Bitcoin as a bet that the Strategy’s premium to the valuation of its crypto holdings would disappear. The premium has all but evaporated.

However, some bulls, including Benchmark analyst Mark Palmer, believe talk of the company’s “doom” goes too far.

“The recent slide in Bitcoin’s price and the corresponding pullback in Strategy’s share price have revived a familiar question,” Palmer wrote on Monday, likening current attitudes on the Street to the negative sentiment following crypto exchange FTX’s collapse in 2022.

“Not surprisingly, some of the loudest fear-mongering has tended to come from those manifestly unfamiliar with the underlying mechanics of the company,” Palmer continued. In his view, Strategy’s preferred and debt servicing payments are “quite manageable relative to its balance sheet and market presence.”

The analyst rates the stock at Buy with a $705 price target, suggesting a potential 350% gain from Monday’s levels. He isn’t the only enthusiast: Fifteen of the 17 analysts polled by FactSet rate the stock at Buy or Overweight. Just two rate it at Hold, and none at Sell.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com and George Glover at george.glover@dowjones.com