Please ensure Javascript is enabled for purposes of website accessibility

Why MicroStrategy Stock Pulled Back Today

By Jon Quast - Mar 5, 2021 at 3:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you guessed this company was going to keep buying Bitcoin, then give yourself a pat on the back for being right.

What happened

Shares of MicroStrategy (MSTR -12.20%) pulled back on Friday, along with many other stocks on the market. Short-term fear is taking hold right now, sparking sell-offs in stocks that have enjoyed stellar returns of late, including MicroStrategy. However, the company did make a move today that investors should be aware of, even though it likely didn't contribute to its 5% decline as of 2:30 p.m. EST.

So what

Today, MicroStrategy announced it bought Bitcoin yet again. It was able to buy 205 Bitcoins with an extra $10 million it had -- the company's reserve policy is to hold Bitcoin instead of cash. This is the fourth time in 2021 the company has converted surplus cash into Bitcoin. Previously, it bought 328, 295, and 314 Bitcoins for $15 million, $10 million, and $10 million respectively.

A frustrated businessman faces a down red stock chart in the background.

Image source: Getty Images.

Of course, I'm only referring to the times this year that MicroStrategy has used surplus cash from operations to buy Bitcoin. But the company has also issued a lot of convertible notes to do it, too. All told, MicroStrategy has acquired 91,064 Bitcoins since late 2020, costing almost $2.2 billion. However, the paper value of its cryptocurrency holdings has grown dramatically over this time -- as of this writing, its Bitcoin is worth over $4.4 billion.

MicroStrategy's unconventional decision to buy Bitcoin has been lucrative for shareholders, with the stock up over 300% in the past six months. That said, the stock had risen faster than the price of Bitcoin. Considering the company's business results have slightly declined, it was reasonable to expect a small pullback in the stock price like what we've seen in recent weeks.

MSTR Chart

Six-month returns for MicroStrategy stock, Bitcoin, and the S&P 500. MSTR data by YCharts

Now what

If I were bullish on Bitcoin (and I am), I would be buying Bitcoin directly, not indirectly with MicroStrategy stock. However, if I were buying MicroStrategy stock, it would be because I was both bullish on Bitcoin and I believed its unconventional reserve policy was distinguishing this software company from its peers, helping it gain new customers. It has yet to demonstrate this to be the case. But comments from management are optimistic that this is what's happening.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
MSTR
$197.44 (-12.20%) $-27.43
Bitcoin Stock Quote
Bitcoin
BTC
$28,882.69 (-5.12%) $-1,557.72

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.