MicroStrategy’s relentless Bitcoin accumulation machine has hit a mathematical snag, according to veteran value investor Christopher Bloomstran.
In a scathing critique posted to the X social media network, the Semper Augustus president argued the company’s latest moves have crossed the line into "idiotic," while acknowledging that it used to seem "smart."
A dilutive move
One has to look at the mechanics of how MicroStrategy funds its purchases in order to grasp the core of Bloomstran's argument.
For much of the bull run, MSTR shares traded at a massive premium to the actual Bitcoin on its balance sheet.
If the stock was trading at 2.0x the value of its Bitcoin, Saylor could sell overvalued equity to buy Bitcoin. This would create "free" value for shareholders.
Bloomstran acknowledges this was financially savvy arbitrage despite viewing selling overvalued shares to retail investors as immoral.
Now, however, things have changed. He notes that MSTR’s market cap is now roughly 82% of the market value of its Bitcoin holdings.
Issuing new shares to buy more assets is mathematically dilutive, which is the core issue here.
He is arguing that Strategy is selling a dollar for 82 cents to buy more of the asset you already own.
The latest buy
The scathing critique comes after the juggernaut recently announced another massive purchase. As reported by U.Today, the firm recently acquired 1,229 BTC at roughly $88,568 per coin. This has pushed Strategy's average purchase price to nearly $75,000.
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