MicroStrategy, the business intelligence company known for its massive Bitcoin holdings, has updated its approach to buying Bitcoin and managing its stock. This change is significant and affects how the company will handle issuing new shares, repurchasing its own stock, and acquiring more Bitcoin.
The New Plan: A Multi-Level Approach
MicroStrategy’s new strategy centers around its “mNAV” (market capitalization divided by Bitcoin net asset value) multiple. Think of mNAV as a measure of how the market values MicroStrategy relative to its Bitcoin holdings. The company has defined different actions based on where its stock price sits compared to this mNAV multiple:
- Above 4.0x mNAV (roughly $1000 per share): MicroStrategy will actively issue new shares to buy more Bitcoin.
- Between 2.5x and 4.0x mNAV (roughly $600-$1000 per share): MicroStrategy will opportunistically issue shares to buy Bitcoin.
- Below 2.5x mNAV (below roughly $600 per share): Issuing new shares becomes more tactical. Priorities are: paying debt, paying preferred equity dividends, and then other advantageous opportunities.
- Below 1.0x mNAV (near $210 per share): MicroStrategy will consider using debt to buy back its own stock.
What Changed? The Flexibility Factor
Previously, the common understanding was that MicroStrategy wouldn’t issue new shares to buy Bitcoin unless its stock price was above 2.5x mNAV. The new plan adds flexibility. Even below 2.5x mNAV, MicroStrategy can issue shares if it sees a good opportunity, after taking care of debt and dividend payments.
Reactions and Speculation
The announcement has sparked debate. Some critics argue the new plan makes it easier for MicroStrategy to dilute existing shares. Others see it as a sign of strong leadership, adapting to changing market conditions.
There’s also a lot of speculation. Some believe MicroStrategy plans to aggressively issue new shares to buy a massive amount of Bitcoin, potentially timed with its inclusion in the S&P 500 index. However, this is just speculation, not confirmed by the company.
The Bottom Line: More Flexibility
The key takeaway is MicroStrategy’s increased flexibility. The company now has a broader range of options for raising capital to buy Bitcoin or repurchase its stock, depending on market conditions and its own assessment of opportunities. This makes their actions less predictable, but potentially more responsive to market dynamics.