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 as the market cap dropped 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 because of the mark-to-market holdings of 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 buying cost is $76,000, meaning that its loss of its holdings has moved to over 14%.
At the same time, its market cap to NAV multiple has dropped to 0.76, meaning 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 on whether Strategy will go bankrupt. Odds of the company being margin called have moved to 16% on Polymarket.
However, the reality is that the company is not at risk of going bankrupt. While Bitcoin has crashed, its holding 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 drops to $15,000.
At the same time, the company has vast resources to cover its dividends and debt in the next two years. It ended the quarter with over $2.3 billion to handle these payments. The CFO 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 had these boom and bust periods, meaning that odds of a recovery are still high. For example, Bitcoin crashed by over 70% in 2022 as the Federal Reserve hiked rates and companies like FTX and Terra collapsed. It then rebounded and reached a record high in 2023.
At the same time, it is not Bitcoin only that is crashing. Top technology companies like NVIDIA and AMD, Microsoft, and Palantir have all collapsed in the past few weeks as investors rotated to value. Therefore, a rebound in these stocks may lead to a Bitcoin recovery as well.
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