The MSTR stock price remains in a deep bear market even as Bitcoin jumped above $115,000. Strategy share has dropped by over 36% from its July high and is now hovering at its lowest level since April.
Michael Saylor’s Strategy Rated Junk
The MSTR stock price has crashed over the past few months, a trend that may continue after S&P Global assigned its first credit rating to a Bitcoin treasury company.
In a report, the company, one of the big three firms in the ratings industry, rated Strategy B-1 with a stable outlook. This rating was two notches below investment grade.
S&P Global identified some major risks that the company faces. One of these risks is a currency mismatch, as the company is largely long Bitcoin and short the US dollar. S&P noted that the company pays its maturities and preferred securities in US dollars.
At the same time, the company noted that Strategy has a cash flow problem as its main source of income is the appreciation of its Bitcoin holdings, which don’t generate any income. As such, S&P notes that in extreme situations, the company may have to sell its Bitcoin holdings to pay down debt.
Most notably, the company has over $8 billion in convertible debt, with about $5 billion being out of the money and maturing in 2028.
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At the same time, it will need over $640 million in outstanding preferred equity, with an annual coupon of about $35 million, which the company hopes to manage through its at-the-market (ATM) issuance of preferred and common shares to fund the coupon.
Meanwhile, the company’s mNAV ratio has continued to fall over the past few months, moving from a high of 3.3 in November last year to about 1.1 today.
The falling NAV Multiple makes the company a bargain compared to where it was a few months ago. However, it also makes it hard to raise cash to continue its Bitcoin accumulation strategy.
MSTR Stock Technical Analysis
The weekly timeframe chart shows that the Strategy stock price has been in a strong downward trend in the past few months. This crash started after it formed a double-top pattern at $455 and a neckline at $233, its lowest swing in March and April.
A double-top is one of the most common bearish patterns in technical analysis. Also, the stock has plunged below the 25-week and 50-week Exponential Moving Averages.
The Relative Strength Index (RSI) has continued to fall after hitting the overbought level at 84, to the current 59, and is still pointing downward.
Therefore, the most likely MSTR stock price is bearish, with the next important support level at $333, down 21% from the current level. A move above the $350 resistance will invalidate the bearish view.
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