Strategy Inc. (NASDAQ: MSTR) closed above the psychologically significant $100 threshold on Friday, finishing the session at $100.01 after a daily increase of 3.3%. Over the past week, the stock has gained 7.2%, outperforming Bitcoin’s roughly 3.1% rise during the same period.
However, beneath this rebound lies a critical concern for long-term investors: the Bitcoin-per-share (BPS) advantage has nearly evaporated. Recent disclosures indicate that the benefits from Strategy’s aggressive Bitcoin accumulation strategy are diminishing when adjusted for the increasing share count.
The stock’s return to triple digits is more a reflection of improving market sentiment rather than a substantive enhancement in the economics of each common share.
Bitcoin-Per-Share Advantage Diminishes
Strategy employs Bitcoin per share, or BPS, as a metric to assess whether additional Bitcoin purchases actually augment exposure for shareholders. This metric divides total Bitcoin holdings by the estimated diluted share count.
During the second quarter, gross BPS saw a 4.8% increase. Unfortunately, that gain was largely offset in the subsequent weeks. By August 2, BPS had dropped 4.3% from the June 30 figure, leaving it only about 0.3% higher than on March 31.
The reasoning is straightforward: Strategy’s Bitcoin holdings slightly declined from 846,000 at the end of June to 842,138 by August 2, whereas the diluted share count rose from approximately 401.3 million to 417.3 million. In essence, the denominator grew faster than the numerator, leading to a reduced share of Bitcoin for each shareholder.
This situation means that while the company still possesses a significant quantity of Bitcoin, each individual share now represents a smaller slice of that holding than it did a few weeks prior.
Aggressive Capital Activities
In a bid to manage its capital structure, Strategy sold around 3.01 million MSTR shares, bringing in about $290.6 million in net proceeds. Additionally, the company sold 1,638 Bitcoin for roughly $104.7 million. A portion of the cash generated from these sales was utilized to fund dividends, while another segment was allocated for repurchasing STRC preferred shares.
Furthermore, Strategy repurchased approximately 912,143 STRC shares for $81.2 million, thereby reducing the outstanding amount of preferred stock. The company finished this period with a reported cash reserve of around $4.0 billion, ensuring liquidity for future dividend and interest obligations.
Notably, the firm opted not to repurchase any common shares despite having a previously authorized $1 billion buyback program. Instead, management prioritized preferred-share repurchases, reasoning that acquiring these securities below their effective cost could diminish future dividend obligations.
Rally Masking Underlying Concerns
The rally on Friday coincided with varied performances in the crypto equity market. Coinbase experienced a 5.6% gain for the day and was up 5.0% for the week, while MARA Holdings plummeted 5.1% on Friday and saw a 10.9% decline over the same weekly timeframe.
This divergence indicates a growing selectivity among investors within the crypto-equity sector, suggesting that not all Bitcoin-linked stocks are being treated as a single investment.
Despite recent fluctuations, analysts maintain a broadly positive outlook on Strategy, although several firms have adjusted their price targets downward post-earnings. Current targets range from $125 to $325, with the average compiled by MarketBeat remaining significantly above the current share price.
This optimism primarily stems from the company’s substantial Bitcoin treasury and its capacity to access capital markets. Nevertheless, the wide variance in target prices underscores a considerable level of uncertainty regarding valuation.
