Please ensure Javascript is enabled for purposes of website accessibility

Why MicroStrategy Stock Was Sliding Today

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

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

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.

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

*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 analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

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.