MicroStrategy Falls 16% Despite New Bitcoin Record as Some Question Valuation

One of the more impressive runs higher ever seen in stocks took at least a brief breather on Thursday, with Bitcoin Development Company MicroStrategy (MSTR) sporting a double-digit percentage loss even as the price of bitcoin {{BTC}} surged to a new record high just shy of $100,000.

At one point lower by more than 20%, MicroStrategy closed the session down 16.2%. The move isn't much more than a large blip on the longer-term chart, with shares still higher by more than five-fold for 2024 and ahead nearly eight times from the level of one year ago.

"MicroStrategy's [valuation] has completely detached from bitcoin fundamentals," wrote Citron Research's Andrew Left earlier in the day. A former bull on the stock who recommended four years ago that investors get long bitcoin by buying MicroStrategy, Left said he remains bullish on BTC but has hedged by shorting MSTR.

Of that valuation, MicroStrategy's market cap yesterday and earlier on Thursday topped $100 billion, or more than three times the value of the roughly 331,000 bitcoin on its balance sheet ($32.5 billion at the current price near $98,000). With today's price decline, MicroStrategy's market cap has sunk to about $80 billion.

"MicroStrategy has officially met my criteria for a textbook parabolic short," wrote well-followed technician Bracco on X prior to the market open on Thursday. Bracco noted three consecutive days of double-digit percentage gains and another major overnight gap higher, among other factors, including that MSTR's dollar volume on Wednesday topped that of mega-cap names like Nvidia and Tesla and that a leveraged ETF dedicated to the stock was the fifth-most traded fund in the entire market.

Writing early Thursday in the WSJ's Heard on the Street column, Jonathan Weil took note of the positive flywheel effect that's provided such a boost to the stock of late. The stock's high valuation allows the company to raise capital at favorable prices and buy bitcoin. Bitcoin rises, the stock rises further, Executive Chairman Michael Saylor and team buy even more bitcoin. And so on.

"If you want to speculate that bitcoin is heading higher, buy some," concluded Weil. "To go long MicroStrategy’s stock is to wager that bizarrely inefficient markets will become even more so."

Read more: MicroStrategy Upsizes Debt Offering to $2.6B; Breaks Into Top 100 U.S. Public Companies by Market Cap

Correction (14:50 UTC, Nov. 22, 2024): Updated values of MSTR market cap and bitcoin holdings.