The MSTR stock price continued its steep crash this week as the Bitcoin price tumbled and its fourth-quarter losses jumped. It crashed to $106, down sharply from the all-time high of $460. Its crash has led to a multi-billion-dollar wipeout, with the market cap dropping from over $130 billion to $35 billion.
MicroStrategy Losses Soared in Q4
A report released on Thursday confirmed that Strategy, formerly known as MicroStrategy, has become a fallen angel. It has moved from being a highly profitable company to making a $12 billion loss in the fourth quarter.
This loss was due to mark-to-market accounting on its vast Bitcoin holdings, which tumbled during the quarter. Its operating loss was over $17.4 billion, while its software revenue rose modestly to $123 million.
Strategy’s losses have continued this year as the Bitcoin price has crashed to nearly $60,000. Its average Bitcoin purchase cost is $76,000, meaning the loss on its holdings has risen to over 14%.
At the same time, its market cap-to-NAV multiple has dropped to 0.76, indicating that its premium has disappeared. Its mNAV, based on the enterprise value, tumbled to 1.12.
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Will Strategy Go Bankrupt as the MSTR Stock Crashes?
The ongoing Bitcoin and MSTR stock price crash has raised concerns about whether Strategy will go bankrupt. Odds of the company being margin called have moved to 16% on Polymarket.
However, the company is not at risk of bankruptcy. While Bitcoin has crashed, its holdings are still worth over $45 billion, much higher than its total debt of $8 billion. Its holdings would be worth over $10 billion if Bitcoin were to drop to $15,000.
At the same time, the company has sufficient resources to cover its dividend and debt obligations over the next two years. It ended the quarter with over $2.3 billion to handle these payments. The CFO recently said:
“We also established a $2.25 billion USD Reserve, providing more than 2.5 years of coverage to support our dividend obligations, further strengthening our credit profile. Strategy’s capital structure is stronger and more resilient today than ever before.”
Most importantly, Bitcoin has always experienced boom-and-bust cycles, so the odds of a recovery remain high. For example, Bitcoin fell by over 70% in 2022 as the Federal Reserve raised rates and companies such as FTX and Terra collapsed. It then rebounded, reaching a record high in 2023.
At the same time, Bitcoin is not the only asset crashing. Top technology companies like NVIDIA, AMD, Microsoft, and Palantir have all collapsed in the past few weeks as investors rotated into value. Therefore, a rebound in these stocks may also lead to a Bitcoin recovery.
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