MicroStrategy’s Bitcoin Play May No Longer Be Working as Stock Slides 16%

Key Takeaways

• MicroStrategy’s stock price has decreased by 16% following Citron Research’s short position announcement.
• The dip appears not to have scared analysts and investors, with the outlook remaining optimistic.
• MSTR stock increased in after-hours trading.

MicroStrategy, the tech company synonymous with Bitcoin, has experienced a significant setback. Shares of MSTR plunged following a short position taken by Citron Research.

However, the stock dip hasn’t affected investor and analyst sentiment, which remains positive for the future of Michael Saylor’s company.

MicroStrategy Stock Dips 16%

MicroStrategy (MSTR) shares dropped over 16% after short-seller Citron Research revealed it had taken a new short position against the stock, which has seen a remarkable 500% increase this year.

Despite Thursday’s decline, MicroStrategy’s stock has surged more than 50% since President-elect Donald Trump’s victory earlier in November. Bitcoin rose approximately 30% during the same period, reaching a new record of $98,000 on Thursday.

Earlier this week, the company, which has transformed into a major Bitcoin investor, announced  it had purchased an additional 51,780 Bitcoins for around $4.6 billion in cash at an average price of just over $88,500 per Bitcoin.

MicroStrategy now holds 331,200 Bitcoins, acquired for $16.5 billion, with an average purchase price of $49,874 per Bitcoin.

Michael Saylor’s company also said  it raised $3 billion through a debt offering, aiming to buy more Bitcoin. Despite yesterday’s decline, the stock is still up by 529% from the beginning of the year, benefitting from the Bitcoin surge.

Citron Research Bets Against MSTR

Citron Research, led by Andrew Left, announced on X  that it is shorting MicroStrategy, claiming the software company has effectively become a Bitcoin investment fund.

Under Chairman Michael Saylor’s leadership, MicroStrategy has heavily invested in Bitcoin, often using debt to fund these purchases. However, with Bitcoin ETFs, investors can now directly invest in Bitcoin without relying on MicroStrategy’s stock as an indirect exposure.

Citron Research pointed out that investing in Bitcoin has become more accessible, suggesting that MicroStrategy’s stock price no longer aligns with Bitcoin’s fundamentals. They stated:

“While we remain optimistic about Bitcoin, we’ve hedged our position with a short on $MSTR.”

Citron’s short position on MSTR adds to another 20 bettors against MicroStrategy. According to Fintel data , there are currently 21 short positions against MicroStrategy, with a short net value of around $4 million.

Outlook Remains Optimistic

The stock decline appears not to have affected sentiment among investors and analysts. While it may be seen as normal profit-taking action, smaller investors usually sell stocks after they gain a lot in value.

Analysts  do not seem scared by the recent negative fluctuation, with the stock increasing by 2.7% in after-hours trading.

Over the past three months, eight Wall Street analysts have provided 12-month price targets for MicroStrategy.

The average target is $357.38, with a high estimate of $570.00 and a low of $270.00. This average target reflects a potential decline of approximately 10.04% from the current price of $397.28.

Financial expectations for the company also remained unchanged, with the next quarter’s loss per share forecasted at $0.13, notably smaller than the previous quarter’s loss per share of $1.72.

Over the past 12 months, MicroStrategy has met its EPS estimate only 25% of the time, while the broader industry has exceeded expectations by 67%.