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Why MicroStrategy Stock Was Sliding Today

By Jeremy Bowman - May 17, 2021 at 1:42PM

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As Bitcoin goes so does MicroStrategy.

What happened

Shares of MicroStrategy (MSTR -0.25%) were falling today in tandem with a broader slide in cryptocurrencies, in particular Bitcoin (BTC -8.98%).

As of 1:57 p.m. EDT, the stock was down 8.8%.

The Bitcoin logo made out of gold nails

Image source: Getty Images.

So what

MicroStrategy is a software company, but the stock's fortunes have become tied to Bitcoin as CEO Michael Saylor has essentially bet the company's future on the cryptocurrency.

Under Saylor's leadership, MicroStrategy has been steadily buying Bitcoin, and Saylor has been so confident in the Bitcoin strategy that the company has been taking on 0% convertible debt to acquire Bitcoin. As of April 28, the company held 91,579 Bitcoins, which have a market value around $4 billion currently.

The price of Bitcoin fell over the weekend and has been softening since Tesla CEO Elon Musk said last week that his electric vehicle company would no longer accept Bitcoin as payment over environmental concerns. He also said he's working with Dogecoin developers to make that cryptocurrency more efficient, which could challenge Bitcoin's use as a currency. 

Now what

Microstrategy is still up substantially on its Bitcoin wager as it acquired the digital tokens at an average cost of $24,214 as of the end of the first quarter. However, Bitcoin's slumping to a three-month low shows the vulnerability of the plan.

If the price of the cryptocurrency tanks, that would put significant pressure on the stock, and even if it only trades sideways, the company would essentially be taking on debt for no reason.

Saylor has been one of the biggest Bitcoin bulls in the corporate world, but the strategy could backfire if Bitcoin prices continue to fade. Expect the stock price to continue to move with the cryptocurrency.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Tesla. The Motley Fool recommends MicroStrategy. The Motley Fool has a disclosure policy.

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Stocks Mentioned

MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
$324.38 (-0.25%) $0.82
Tesla, Inc. Stock Quote
Tesla, Inc.
$908.61 (-0.37%) $-3.38
Bitcoin Stock Quote
$21,458.99 (-8.98%) $-2,116.55
Dogecoin Stock Quote
$0.07 (-15.55%) $0.01

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