While the aggressive accumulation of bitcoin (BTC) by Strategy (MSTR) has led to a staggering 2,500% increase in its stock price over the last five years, one analyst believes that this trend might soon reverse.
“Although we had reservations at the onset, our growing confidence suggests that the strategy surrounding convertible issuance may be reaching its limit,” said Gus Gala, an analyst at Monness Crespi, who recently downgraded MSTR to a sell after initially rating it as neutral just two weeks prior.
At present, Strategy maintains a substantial holding of 528,185 BTC on its balance sheet and has been actively purchasing large amounts almost weekly in recent months. This buying spree has primarily been financed through the issuance of common shares and also from the sale of its first preferred series, STRK.
Gala’s price target of $220 indicates a potential drop of nearly 30% from the current trading price, which hovers around $300.
He contended that it will become progressively harder for MSTR to gather funds for bitcoin purchases through share issuance, necessitating a pivot toward fixed income options.
“If there isn’t a greater emphasis on fixed income securities in new issuances, the btc treasury strategy will face increasing difficulties.”
Gala pointed out that MSTR has already utilized $18.6 billion out of its $21 billion common share at-the-market offering, in addition to raising another $711 million last week via STRF, its second series of preferred stock.