MicroStrategy shares slump after Citi downgrade

In trading on Tuesday, December 8, MicroStrategy Inc. shares fell 13.9%, after plans to issue $400 million in convertible bonds to expand Bitcoin holdings and Citi analysts’ downgrade of the stock to ‘sell’, as reported by The Block.

New: Citi downgrades MicroStrategy to sell rec, citing concerns around plan to issue debt to buy BTC

The bank says CEO Michael Saylor has been «largely removed» from his operational role while making appearances in crypto press. Also, management stock selling has topped 50m. pic.twitter.com/yadAxkoSOG

— Frank Chaparro (@fintechfrank) December 8, 2020

The investment bank noted the stock’s ‘overextended’ rally and rising insider selling. Experts say this calls into question proclaimed strategy by MicroStrategy CEO Michael Saylor to invest the company’s reserves in Bitcoin.

Experts suggested that the plans to issue the bonds could be the ‘last straw’ for investors. The CEO’s heightened focus on the leading cryptocurrency could divert attention from operating activities and dampen team morale.

Citi said that the recent rally in MicroStrategy’s stock was «overextended» + described its plan to raise $400m via convertible notes to buy BTC as a possible «deal-breaker for software investors.» Management selling signals lack of confidence in bitcoin allocation strategy pic.twitter.com/J4eCU2B8Bt

— Frank Chaparro (@fintechfrank) December 8, 2020

At the close, MicroStrategy stock traded at $289.45. Since the disclosure on 11 August of first purchase of Bitcoin for $250 million (21,454 BTC), the stock has risen 134.15%. The first cryptocurrency, Bitcoin, rose 53.9% in the same period.

In September the company acquired an additional 16,796 BTC for $175 million.

In early December MicroStrategy carried out the third investment to date in Bitcoin for $50 million (2,574 BTC).

According to Bitcoin Treasuries, the value of the cryptocurrency held by the analytics software provider has risen this year from $475 million to $742.4 million. The current gain on the position is 7.8 times MicroStrategy’s net income from its core operations last year.

In November, Citi Bank allowed for the possibility of Bitcoin rising to $318 315, if the cryptocurrency can secure its status as the digital gold of the 21st century.

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