The biggest holder of Bitcoin (BTC-USD) is doubling down even as the market swings wildly. On Monday, April 6, Strategy ($MSTR) revealed that it lost about $14.5 billion on paper during the first quarter because the price of Bitcoin dropped. Usually, a loss that big would scare people away, but Strategy stock jumped over 6% to $127.15 today. Investors seem more focused on the fact that the company just bought even more Bitcoin (BTC-USD) and has a plan to keep the lights on for years.
Michael Saylor Creates a New Buying Plan
Even after a tough quarter where Bitcoin fell more than 20%, the company is not stopping. Between April 1 and April 5, the firm bought another 4,871 Bitcoin for about $330 million.
To pay for these new coins, the company sold some of its own stock. Michael Saylor is now using a special type of preferred stock to raise money. This helps the company buy more Bitcoin without making the original shares worth less for current owners. The company is now trying to raise up to $42 billion using this method to keep its Bitcoin streak alive.
Strategy’s Cash Reserves Keep the Company Safe
While the $14.5 billion loss looks scary, it is unrealized, which means the company only loses that money if it sells its Bitcoin today. To make sure they don’t have to sell, the firm has built a massive safety net.
The company has $2.25 billion in cash sitting in the bank. This is enough money to pay all its bills and interest for more than two years, even if the market stays down. Because of new accounting rules, every time the price of Bitcoin moves, the company’s official earnings move by billions of dollars. This makes the stock act like a rollercoaster, but today, the market is cheering for the new purchases.
Bitcoin Needs to Grow Faster Than the Bills
The big gamble for Strategy is a race against time. For this model to work, the price of Bitcoin has to go up faster than the interest the company owes on its debt.
Most analysts believe that as long as the company doesn’t run out of cash to pay its monthly bills, it can wait for the next big crypto rally. With Bitcoin trading near $70,000 on Monday, the premium that people used to pay for Strategy stock is starting to come back. As long as Saylor can keep finding ways to raise money without hurting current shareholders, the market seems happy to go along for the ride.
Is Strategy Stock a Good Buy?
According to TipRanks, Strategy (formerly known as MicroStrategy) stock has a consensus Strong Buy rating among 12 Wall Street analysts. This rating is based on a unanimous 12 Buy ratings assigned in the past three months. The average 12-month MSTR price target of $284.17 implies 123.9% upside from current levels.
