MicroStrategy’s 10 Billion Share Move Explained

• MicroStrategy seeks shareholder approval to increase authorized shares from 330 million to 10.33 billion to sustain its Bitcoin acquisition strategy.
• Critics seem to misunderstand the proposal, fearing massive immediate dilution, while the reality is a structured approach to long-term value creation through Bitcoin accumulation.

On Dec. 23, MicroStrategy filed Form Pre-14A with the U.S. Securities and Exchange Commission  (SEC), a document used to notify shareholders about proposals that require their vote (Figure 1).

The filing outlines a plan to amend the company’s certificate of incorporation, increasing the number of authorized Class A common stock shares from 330 million to 10.33 billion.

The announcement has sparked a wave of misconceptions, affecting not just shareholders but also industry skeptics, media pundits and self-proclaimed market experts.

Much of the uproar centers on fears of massive dilution, with dramatic predictions suggesting that the value of existing shares could vanish.

This fear isn’t purely rational. While the doomsday narrative might grab attention, it overlooks the fundamental realities supporting the proposal.

A Larger Share Authorization Doesn’t Mean Overnight Dilution

As of Dec. 23, the number of outstanding shares sit at 244,858,000 (Figure 2). Including fully diluted shares, the figure increases to 280,828,000.

The company’s current cap on authorized shares is 330 million, which leaves limited room for growth without shareholder approval.

The answer lies in MicroStrategy’s Bitcoin (BTC) business model, which relies on two primary methods to fund Bitcoin purchases:

• Convertible notes: MicroStrategy issues bonds at low or even zero interest rates that can later be converted into shares.
• At-the-market (ATM) offerings: The company sells new shares directly to the market.

In essence, MicroStrategy is “printing shares” to buy Bitcoin. If the company cannot issue additional shares, its strategy comes to a standstill. The current cap of 330 million shares limits this capability, which is why the company is seeking an increase.

Why Such a Significant Increase?

At first glance, increasing authorized shares by 31.3 times might seem excessive. However, the likely purpose behind this request is to facilitate a 10-for-1 stock split.

Such a split would increase the share count tenfold while keeping the overall market capitalization intact and ensuring that investor ownership percentages remain unchanged.

Stock splits are used to make shares more affordable for smaller investors by lowering the nominal share price. This straightforward move enhances liquidity.

If MicroStrategy conducts a 10-for-1 split following approval, its share count would increase to approximately 2.45 billion. The remaining authorized shares would likely be used to support future ATM offerings and convertible note conversions.

Let’s Address the Questions

What if MicroStrategy actually increases the number of shares in a single day?

The company would undermine its own value by flooding the market with billions of shares, leading to a significant drop in the stock price.

Basic economic principles dictate that when supply exceeds demand, prices fall (Figure 3). If the market can’t absorb this new supply, the price per share would naturally decrease.

Consequently, this would hinder the company’s ability to raise substantial funds in the future, as lenders offering convertible notes rely on the stock’s potential to maintain or increase its value.

This is precisely why MicroStrategy was unable to buy as much Bitcoin during the 2022 bear market as it did in 2024.

A plummeting stock price would also undermine MicroStrategy’s entire Bitcoin strategy. Critics have already compared its approach to a Ponzi scheme. Executing such rapid dilution would only reinforce those concerns and derail any long-term plans.

For context, consider AMC, the 2021 meme stock. Between 2020 and 2024, AMC issued shares so aggressively that its outstanding share count rose by over 1,500% (Figure 4).

The resulting dilution crushed shareholder value, as evidenced by the stock’s dramatic decline (Figure 5).

Saylor’s agenda focuses on acquiring as much Bitcoin as possible. He once said:

“Once I understood Bitcoin, I would go to bed with anxiety at night feeling short because I worry that somebody else will figure out what I figured out and they would buy it all, and I wouldn’t be able to buy anymore.”

If he had the money, he would secure the largest Bitcoin supply ever for MicroStrategy. However, maintaining the ability to continue purchasing is equally important.

Losing that option would cripple MicroStrategy’s strategy, leaving the company unable to acquire additional Bitcoin. Saylor seems to understand that preserving this capability requires careful resource management.

What if MicroStrategy dilutes shares by 3.13x after accounting for a potential 10:1 split?

Even with a 3.13x increase, the dilution wouldn’t happen overnight. Based on historical trends, MicroStrategy has increased its outstanding share count by around 45% annually since 2023.

At that pace, reaching 10.33 billion shares would take roughly 3.5 years, not a single day. The table below accounts for the August 2024 10:1 split and assumes the possibility of an additional 10:1 split in the future.

Typically, issuing shares  to fund operations signals poor management and a significant red flag for investors. Most companies resort to this tactic when they lack sufficient revenue or profit to cover expenses, sometimes issuing shares just stay afloat.

While such dilution usually harms shareholders, MicroStrategy’s case is unique. The company uses proceeds to purchase Bitcoin, an appreciating asset that ultimately benefits shareholders. In essence, it’s a calculated trade-off: A negative action (dilution) to facilitate a positive outcome (Bitcoin accumulation).

The strategy relies on Bitcoin’s long-term appreciation. If BTC prices rise significantly, the increase in asset value on MicroStrategy’s balance sheet will more than compensate for the dilution, ultimately enhancing shareholder value.

This approach mirrors some of the most daring financial maneuvers in history, such as Rockefeller’s use of deferred payment plans to consolidate the oil industry, Carnegie’s vertical integration of steel production, and Bezos’s strategic reliance on convertible notes to dominate e-commerce.

Could MicroStrategy raise $3.5 trillion by issuing 10 billion shares at $350 each?

Highly unlikely. A mass issuance of shares would crash the stock price, drastically limiting the amount of capital raised. MicroStrategy’s current market cap is under $90 billion.

Expecting to raise trillions of dollars while maintaining the current stock price defies basic market logic.

The company’s ongoing strategy of gradual share sales through ATM offerings and convertible notes allows it to optimize proceeds without destabilizing its share price.

Conclusion

MicroStrategy’s request to increase authorized shares to 10.33 billion aligns with its Bitcoin accumulation strategy. The proposed change provides flexibility for future actions, including a likely 10-for-1 stock split and measured share issuances over several years.

Investors concerned about immediate dilution misunderstand the company’s intent. MicroStrategy’s gradual issuance model through ATM offerings and convertible notes has proven effective (Figure 6).

A rapid, single-day issuance of billions of shares would undermine its strategy and destroy shareholder value. Critics imagining a $3.3 trillion windfall from new shares fail to grasp the economic realities of dilution.

Ultimately, MicroStrategy’s approach rests on faith in Bitcoin’s long-term value. Shareholders betting on the company are also betting on Bitcoin.

Those who share Saylor’s vision may view the share authorization increase as a logical step. Those who don’t share this vision have the option to sell the stock or even short it.

Either way, the company’s actions align with its mission to amass as much Bitcoin as possible.