Overview

Concerns have emerged regarding MicroStrategy’s (MSTR) aggressive strategy for acquiring Bitcoin (BTC). Over the past five years, this strategy resulted in a stunning increase of over 2,500% in the company’s shares, though analysts suggest that this trend may soon reverse.

Key Points

• Monness Crespi has downgraded MSTR to a sell rating, indicating potential further declines.
• Analyst Gus Gala believes MicroStrategy’s convertible issuance strategy may have reached its limits, raising concerns about funding challenges for future Bitcoin purchases.

“While we were negative on several aspects upon initiation, we have gained incremental confidence that the convertible issuance strategy is likely tapped,” stated Gus Gala in his analysis.
“Mientras éramos negativos en varios aspectos al inicio, hemos ganado confianza incremental de que la estrategia de emisión convertibles probablemente ha llegado a su límite.”

MicroStrategy currently holds 528,185 BTC on its balance sheet and has relied heavily on common share issuances to fund its buying spree, which has been aggressive in recent weeks.

Gala predicts a price target of $220, which reflects a downside of nearly 30% from the current trading levels around $300.

Conclusion

As raising funds to purchase Bitcoin via share issuance may become increasingly difficult, MicroStrategy could face tough challenges in sustaining its Bitcoin acquisition strategy moving forward.