Retail investors who loaded up on shares of MicroStrategy (MSTR) are feeling the pain after the business intelligence firm’s stock price collapsed nearly 40% from its all-time high set just last week. The dramatic reversal has left many individual shareholders – who had been betting big on CEO Michael Saylor’s aggressive bitcoin acquisition strategy – holding the proverbial bag.
MicroStrategy’s Wild Ride
It was a historic week for MicroStrategy, though not in the way bullish investors had hoped. The Virginia-based company, which has gained notoriety for borrowing billions to buy bitcoin for its corporate treasury, saw an unprecedented surge in trading volume and volatility:
- MicroStrategy shares skyrocketed over 600% year-to-date at one point, reaching an all-time high of $540 on November 21st
- Retail investors bought a record $42 million of MSTR stock on November 20th alone, 8x the daily average in October
- In total, individual shareholders purchased nearly $100 million worth of MicroStrategy shares last week
But the party didn’t last. On November 21st, noted short-seller Citron Research published a scathing report on MicroStrategy, calling its leveraged bitcoin gamble “the most concentrated bet in the history of the stock market.” Shares plummeted in the wake of the news, shedding 40% in a matter of days. The sell-off coincided with a sharp pullback in the price of bitcoin, which retreated to $90,000 after briefly surpassing the $100,000 milestone.
The Saylor Faithful Get Burned
MicroStrategy’s cult-like following, who have full faith in Michael Saylor’s bitcoin evangelism, were caught off guard by the sudden downturn. Online investor forums were flooded with tales of woe, with some commenters reporting six-figure losses incurred over just a few trading sessions.
“I bought $200k of MSTR at $531 on margin because I believed in the Saylor,” one Reddit user wrote. “Now I’m facing a margin call and down over 50%. I feel sick to my stomach.”
Anonymous retail investor on Reddit
The rapid unwind revealed the perils of investing in a company whose fortunes are so closely tied to the whims of the highly volatile cryptocurrency markets. Even after the pullback, MicroStrategy holds over 386,700 bitcoins purchased at an average price of $36,450 – an incredible $14 billion position financed largely with debt.
Uncharted Waters
With MicroStrategy stock still trading at a nosebleed valuation of 2.09x the value of its underlying bitcoin holdings, some analysts warn of further pain ahead for shareholders. The company is now a case study in the dangers of taking on too much leverage to speculate on an unproven, risky asset class.
It remains to be seen whether MicroStrategy’s true believers will be shaken or redouble their conviction in Michael Saylor’s audacious bitcoin bet. But one thing is clear: their faith is being put to the ultimate test.
