The stock price of Microstrategy is down more than 55% year to date as its unrealized loss on holdings of bitcoin has reached $1.3 billion.
Brent Thill, an analyst at Jefferies, downgraded the software analytics provider from “hold” to “underperform” because the prolonged crypto crisis hasn’t produced any convincing signs of a market turn.
The price objective for the downgraded rating that changed the stock’s classification from “hold” to “underperformance” remained at $180. As a result of the news and bitcoin falling under $21,000 on Tuesday, shares of Microstrategy decreased by more than 10% to $237.
MicroStrategy now possesses 129,200 BTC valued at roughly $2.7 billion, with the market capitalization at $2.8 billion. The NASDAQ-listed firm has an enormous unrealized loss of $1.3 billion after investing over $4 billion in building up its stockpile.
According to reports, the firm’s aggressive bitcoin wagers and the anticipated slowdown in its core activities are to blame for the downgrading. The company denied rumors that it would face a margin call for its leveraged position of a $205M loan secured by bitcoin during the height of the selling pressure in June.
Before Jefferies announced downgrades, Wall Street analysts already had a negative outlook on the company’s prospects in light of the continued market collapse. On Saturday, July 2nd, StockNews.com rated shares of MicroStrategy as a “sell,” and on May 9th, TheStreet lowered the stock from a “c-” rating to a “d+.”
The most recent price decline coincided with intense pressure on stocks related to crypto. For instance, according to J.P. Morgan analyst Kenneth B. Worthington, publicly traded crypto exchanges Coinbase and Robinhood are expected to dilute their shares by about 7% annually in the upcoming years.
High-growth crypto companies frequently use stock-based pay to entice employees and cut down on operating costs. Companies must issue more stock than they would have at higher prices in order to satisfy employees’ expected dollar-based remuneration levels as share prices fall.