MicroStrategy is once again at the forefront of financial controversy as its market capitalization now sits below the value of its Bitcoin holdings. With shareholders experiencing staggering losses and the company facing mounting financial pressure, the path ahead looks increasingly uncertain. Let’s delve into the key factors affecting MicroStrategy and whether shareholders face further risks ahead.
MicroStrategy’s Market Cap Falls Below Bitcoin Holdings
Throughout the last year, MicroStrategy’s stock price has been in a near-constant freefall. After peaking at $543 in late 2024, the share price has since declined to approximately $220—a colossal 60% loss. This has created a striking disparity between the company’s market cap and the value of its Bitcoin holdings.
As of now, here’s how the numbers break down:
- Market Cap: ~$63.5 billion
- Bitcoin Holdings: 641,692 BTC (valued at ~$65.5 billion)
This means that MicroStrategy’s market cap is actually lower than the Bitcoin it holds, reflecting significant market skepticism toward the company’s financial health and strategy.
Understanding the mNAV and Why It Matters
The multiple Net Asset Value (mNAV) is a critical metric for evaluating Bitcoin treasury companies like MicroStrategy. The formula for mNAV is:
mNAV = Enterprise Value ÷ Bitcoin Holdings Value
Including its convertible notes (~$8.25 billion) and preferred shares (~$6.75 billion), MicroStrategy’s enterprise value sits at ~$78.5 billion. This places its mNAV at about 1.2×—above one, but far from reflecting strong investor confidence.
Why Is MicroStrategy Struggling?
The company’s challenges stem from two major factors: reduced Bitcoin purchases and heavy financial obligations.
1. Slower Bitcoin Accumulation
MicroStrategy’s pace of Bitcoin purchases has slowed dramatically. Over the past year, the company acquired over 400,000 BTC. However, since August 2025, it has only added 12,746 BTC to its reserves. This slowdown signals difficulties in raising capital for further Bitcoin acquisitions.
2. Dependence on Preferred Shares
To fund its Bitcoin strategy, MicroStrategy has heavily leaned on issuing preferred shares. This approach, however, comes with significant annual dividend obligations (exceeding $700 million), which have compounded shareholder risks and resulted in dilution as new shares were issued to meet these payments.
The Dangerous Potential of a “Dilution Loop”
A persistently low valuation creates what many analysts describe as a “dilution loop,” where falling share prices lead to greater issuance of shares, increasing obligations and risks:
- Lower share price = more share dilution: The company must issue more shares to raise the same amount of capital.
- Rising financial obligations: Interest, dividends, and other debt payments continue to mount.
- Higher leverage = higher risk: With less effective fundraising capacity, MicroStrategy’s reliance on debt or risky decisions increases.
Long-Term Risks for Shareholders
While MicroStrategy has survived previous financial crises, including a bear market in 2022 where its mNAV dipped below 1.0, the long-term picture remains troubling. The company’s strategy is heavily reliant on its stock trading at a premium to its Bitcoin holdings. A persistently depressed valuation could weaken MicroStrategy’s ability to continue accumulating Bitcoin and increase the likelihood of selling assets to cover obligations.
Short-Term Risks
- Potential for continued share dilution
- Diminishing ability to fund Bitcoin purchases
- Mounting dividend obligations
Medium-Term Risks
- Increased reliance on leverage
- Convertible debt maturities beginning in 2028
Long-Term Outlook
The sustainability of MicroStrategy’s financial model remains in question. Shareholders are not guaranteed to lose everything, but structural risks, combined with a narrowing margin for error, make the company’s future increasingly precarious.
Conclusion: What Should Shareholders Do?
MicroStrategy’s current predicament highlights the risks of investing in a company so deeply tied to Bitcoin. Investors should weigh the potential for further downside against any long-term Bitcoin recovery. For those looking to diversify their portfolio, consider exploring other asset classes or even cryptocurrency-related ETFs with less direct exposure to a single company’s operational risks.
Interested in adding Bitcoin exposure while managing risk? Check out financial solutions like the Grayscale Bitcoin Trust (GBTC), which offers investors a diversified way to capitalize on Bitcoin’s potential without tying themselves to MicroStrategy’s volatile outlook.
