MicroStrategy Stock: The Bitcoin Bet Trading Below Its Own Assets
Strategy stock (NASDAQ: MSTR) plunged 10% yesterday to $143, extending its six-month decline to 64%. Investors are well aware of the cause: MicroStrategy has evolved beyond its origins as a software company to become a leveraged Bitcoin treasury vehicle. The company now holds approximately 712,647 BTC—worth roughly $60 billion—representing over 3.4% of Bitcoin’s total supply.
Consequently, as the price of Bitcoin fluctuates, so does MSTR. Bitcoin is currently trading around $82,000, a significant retracement from its high of over $126,000 in October last year. With a market cap of approximately $46 billion, MSTR stock is trading below the total value of its Bitcoin holdings, offering investors a discount to Net Asset Value (NAV). Does this make MSTR a “buy” at these levels? We will explore this in the sections below.
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How can a stock trade below its asset value? The company reported a $17.44 billion unrealized loss in Q4 2025 as Bitcoin declined 25% in that quarter. Under accounting rules adopted in Q1 2025, MicroStrategy marks Bitcoin holdings to fair value quarterly, creating massive earnings volatility. The stock fell 53% in Q4 alone and is down 66% from all-time highs. That’s not a software business fluctuation—that’s pure Bitcoin beta amplified by leverage.
Let’s talk about the business model. Is this sustainable? CEO Michael Saylor has raised close to $50 billion via equity and debt offerings over the last five years to accumulate Bitcoin. In early January 2026, the company purchased another $116.3 million in Bitcoin even as it sat on paper losses. The strategy is to continuously raise capital at any Bitcoin price and accumulate more. Saylor calls this “Bitcoin yield”—increasing Bitcoin per share over time.
But what about actual cash flow? Here’s the problem: The legacy software business generates minimal revenue—Q4 2025 software revenue was $128.69 million against estimates of $116.65 million. The company has dividend and interest obligations totaling $689 million annually. In December 2025, management established a $2.19 billion cash reserve specifically to cover these payments for approximately 21 months. That defensive move screams liquidity concern.
The company doesn’t generate enough operating cash flow to service debt and pay dividends without either selling Bitcoin (which Saylor refuses to do) or continuously issuing equity/debt. This creates a perpetual dilution machine. Every capital raise to buy more Bitcoin dilutes existing shareholders, even as Bitcoin per share theoretically increases.
What’s the valuation framework here? Traditional metrics don’t apply. The company trades at a market cap of $43 billion against Bitcoin holdings worth $60 billion—a 0.7x price-to-NAV ratio. Historically, MSTR traded at significant premiums to NAV (sometimes 2-3x) because it offered leveraged Bitcoin exposure in a publicly traded equity. That premium has completely evaporated and flipped to a discount.
Why would anyone pay a premium for Bitcoin exposure when Bitcoin ETFs exist? Exactly. The introduction of Bitcoin spot ETFs in 2024 provided direct, low-cost Bitcoin exposure. MicroStrategy’s premium to NAV compressed dramatically because the structural advantage disappeared. Now it trades at a discount, presumably reflecting the debt burden, dilution risk, and business model uncertainty.
The MSCI index drama—what was that about? In late 2025, MSCI proposed excluding companies with over 50% balance sheets in digital assets. This directly threatened MicroStrategy’s inclusion in major indexes. Passive flows from index funds would force sales. JPMorgan estimated potential outflows of $8.8 billion. On January 6, 2026, MSCI decided not to exclude digital asset treasury companies, triggering a 2.5% stock surge. But MSCI explicitly stated it will conduct a broader review and won’t increase MicroStrategy’s index weighting or allow size-segment migrations. The threat isn’t gone.
Let’s address the elephant: What happens if Bitcoin goes to $150,000? The stock would surge because the NAV would expand dramatically. Analysts covering MSTR have an average price target of $454, implying a 3x upside from current levels. These targets assume Bitcoin appreciation drives NAV higher and the stock recaptures some premium to NAV.
But what if Bitcoin goes to $50,000? The company would face severe stress. With $689 million in annual obligations and a 21-month cash cushion, a prolonged Bitcoin decline below the company’s average cost basis would create a crisis. Saylor has repeatedly stated he won’t sell Bitcoin, so the only option would be more equity raises at distressed prices, massively diluting shareholders. The debt pile becomes problematic if refinancing becomes necessary at higher rates.
How profitable is the actual software business? Q4 2025 adjusted EPS of $8.42 per share massively beat the -$0.10 estimate, surprising by 8,350%. But that’s entirely due to Bitcoin mark-to-market accounting changes, not software profitability. The software business is essentially irrelevant to the investment case. It provides some cash flow and maintains the corporate structure that enables the Bitcoin strategy, but nobody buys MSTR for enterprise analytics software.
Here’s the critical insight: MicroStrategy has created a tax-advantaged Bitcoin accumulation vehicle. The company issues preferred equity with dividends classified as return-of-capital, providing tax benefits. It converts Bitcoin volatility into yield for investors willing to tolerate massive drawdowns. This works brilliantly in Bitcoin bull markets and catastrophically in bear markets. For instance, during the 2022 inflation shock, MSTR stock fell 89.3% from a high of $127.29 on 9 February 2021 to $13.66 on 29 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500.
The bottom line: For investors, this is binary. If you’re bullish on Bitcoin and want leveraged exposure, MSTR at a discount to NAV offers that with added business risk. If you’re neutral or bearish on Bitcoin, there’s no reason to own this. The 66% decline from highs shows what happens when Bitcoin corrects and the leverage works against you. Trading at $143 with analysts targeting $454 suggests the market is pricing in significant downside risk that analysts don’t believe in. Someone is wrong. Your conviction in Bitcoin determines which side you take.
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