Strategy's stock has declined by 4% over the last month compared to Bitcoin’s 3% dip. The split has cast doubt on the high-profile approach that Michael Saylor has used to transform the company into a Bitcoin-oriented organization. The company has also funded massive Bitcoin acquisitions with debt and equity since 2020, which previously drove its share price 2,800%.
Other corporations that followed the Bitcoin treasury form have suffered stiffer losses. Japanese hotel operator Metaplanet fell by 36% during the same month. KindlyMD, a medical start-up that owns Bitcoin, experienced an 87% drop in its stock.
Semler Scientific dropped by 12%, and Trump Media slipped by 8%. Cantor Fitzgerald's new crypto-linked product, affirmed by Twenty-One Capital and supported by SoftBank and Tether, fell 17% before its IPO was launched.
Over 180 publicly traded companies are currently holding Bitcoin, equivalent to approximately 5% of the total supply. 94 companies among them had a strategy similar to Saylor's. According to K33 research, nearly a quarter of these firms are now worth less than the Bitcoin they are holding, a sign of market saturation and investor concern.
Skepticism exists over Strategy's ability to continue buying Bitcoin. Short-seller Jim Chanos remarked on Bloomberg that the company is trading above the price of Bitcoin itself, and that there is a premium on its shares.
The company has been overly relying on convertible bonds, whereby investors would replace the debt with equity in case the stock appreciates. Its 2024 note on conversion is not profitable until the company doubles its stock to $672, but it is currently trading at a discount.
Analysts point out that the Strategy's profit is attached mainly to non-realized gains in crypto, which bond markets are concerned about. Issuing more equity risks shareholder dilution, leaving limited funding options.
Not a single company in the industry reported losses. American Bitcoin, which is supported by the Trump family member Eric Trump, jumped 16% in the month. GameStop, which recognized the inclusion of Bitcoin on its balance sheet, increased 12%. Analysts, however, warn that competitors might constrain the broader Bitcoin treasury as companies continue to vie for investor demand.
The decline highlights the dangers associated with corporate Bitcoin strategies. As most companies have higher valuations than their crypto assets, it may become more stressful in the case of a further decline in Bitcoin prices, as companies have to make difficult choices on both debt and assets.
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