Strategic Equity Pivot Unrelated to Bitcoin Holdings Decline, Says Analyst

Benchmark analyst Mark Palmer defends the recent share price dip of Strategy, emphasizing it’s about market conditions, not poor management.

What to know:

• The recent drop in Strategy’s stock price reflects a shrinking premium related to its bitcoin assets, according to Benchmark analyst Mark Palmer. This should not be viewed as mismanagement but rather a response to market dynamics.
• Palmer pointed out that the firm has continually evolved its balance sheet, introducing vehicles like perpetual preferred stock that foster demand for bitcoin-linked financial products.
• With the possibility of being included in the S&P 500, Palmer highlighted that Strategy remains a valid option for those wanting exposure to bitcoin.

Concerns Raised: The criticisms surrounding Strategy’s share price primarily come from retail investors, who believe Michael Saylor, the Executive Chairman, has eroded discipline by permitting equity issuance when the company’s premium to its bitcoin net asset value (mNAV) descends below 2.5x.

Rebuttal: Palmer, in his report, argued that this criticism misunderstands the market context.

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By adapting its guidance to permit tactical equity issuance even under the 2.5x threshold for mNAV, Strategy reopened its options, allowing continued bitcoin purchases during market lulls. This maintains their growth strategy effectively.

This approach, Palmer asserted, is consistent with their historical adaptability—illustrated through actions such as minimizing restrictive debt and innovating financial mechanisms aimed at maintaining robust capital without refinancing risks.

The potential inclusion in the S&P 500 could significantly influence Strategy’s stock, ushering billions in passive inflows from traditional investors.

Palmer reaffirmed a buy rating and set a price target of $705, indicating the stock could more than double from its current standing of $332.

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