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Why MicroStrategy Stock Pulled Back Today

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

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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.

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Stocks Mentioned

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

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