Shares of MicroStrategy (MSTR 0.78%) were falling Tuesday after the company said Monday that it plans to offer $400 million worth of convertible senior notes to qualified institutional buyers. With the money raised, it plans to purchase more bitcoin. An analyst downgraded the stock following the announcement.
The tech stock fell by as much as 11.9% on Tuesday morning, and was down by 10.7% as of 1:05 p.m. EST.
Investors clearly weren't enthusiastic about the announcement. Nor was Citi analyst Tyler Radke, who downgraded the company's stock from neutral to sell. MicroStrategy's stock began skyrocketing last month, partly after a short-seller issued a positive report about the company. But Radke believes MicroStrategy's share price gains have become "overextended," and that this new debt offering and bitcoin-buying strategy make the company an incrementally riskier investment.
Even after Tuesday's slide, MicroStrategy's stock is still up by about 110% year to date.
In a Dec. 4 SEC filing, MicroStrategy said that it now holds 40,824 bitcoins. CEO Michael Saylor said in a recent interview with CoinDesk that the company's strategy of purchasing bitcoin is meant to "preserve our treasury." Based on Tuesday's share price drop, it appears investors may not approve of that approach.