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MicroStrategy, led by founder and chairman Michael Saylor, is on the verge of a significant move: a proposal to increase the number of authorized Class A shares from 330 million to 10.3 billion.
If approved on January 21, the company could have more shares outstanding than almost all major companies in the Nasdaq 100, including Amazon and Alphabet.
Bitcoin strategy remains central
In recent years, MicroStrategy has gone from being a software company to one of the most prominent Bitcoin investors. Since the company began integrating Bitcoin in 2020, its stock price has risen by over 2,500%, while Bitcoin has gained nearly 800% over the same period. The company now owns more than $46 billion in Bitcoin, acquired through an aggressive weekly buying strategy.
MicroStrategy’s Bitcoin holdings
The proposed equity plan is designed to fund Saylor’s ambitious plans, including a previously announced goal of raising $42 billion in capital over three years. This capital will be used to buy BTC through a combination of equity and debt issuances. So far, MicroStrategy has raised $21 billion and issued 43 million new shares under this strategy.
Why Investors Remain Optimistic
Increasing the number of shares is usually met with skepticism by shareholders as it can lead to dilution of shares and voting rights. Nevertheless, Wall Street remains bullish on MicroStrategy due to the company’s unprecedented growth and unique “bitcoin yield” model. This model measures the increase in bitcoin per share over time, but does not take into account the price changes of BTC itself.
Analysts stress that investors may be less concerned about dilution as the company is heavily focused on rising Bitcoin values. Saylor, who controls 47% of voting rights through his Class B shares, has made it clear that the new shares will be used for future purchases, stock conversions and other transactions.
Criticism of the strategy
Despite positive reactions, there are concerns. Analysts such as Michael Lebowitz of RIA Advisors warn that issuing such a large amount of shares could reduce MicroStrategy’s leverage, which is one of its attractive features for investors. Without new debt financing, the reliance on stock sales could lead to a less risky but also less profitable position.
MicroStrategy $mstr is preying on investors. They are pumping up optimism on Bitcoin to drive higher volatility in their stock. Doing so allows them to raise funds and add to their Bitcoin holdings. Its convertible funding strategy is legal, but the risks to its shareholders and…
— Michael Lebowitz, CFA (@michaellebowitz) December 11, 2024
In addition, MicroStrategy’s original software arm remains loss-making, with several quarters of negative results. This means that the company’s value depends almost entirely on the performance of Bitcoin and its ability to raise further capital.
Vote on the proposal
Shareholders will vote on the proposal on January 21, which requires a majority of voting rights to pass. In addition to increasing Class A shares, MicroStrategy also wants to increase the number of preferred shares from 5 million to 1 billion – another step to raise additional capital.
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