Beginning of the end? Strategy dilutes MSTR, slashes EPS guidance 76%
This morning, Strategy (formerly MicroStrategy) slashed its earnings per share (EPS) guidance from $80 to $19. That 76% reduction is its new high of a range spanning to negative $17 per share.
In other words, Strategy has a new EPS guidance range that is 76-121% lower than its original target for December 31, 2025.
Worse, the bitcoin (BTC) holding company and its founder Michael Saylor announced $1.44 billion of pure dilution of its common shareholders, MSTR.
Unlike the company’s prior sales of MSTR that accrued BTC holdings, Strategy bought no BTC with that $1.44 billion, directly diluting shareholders instead.
Although it used $11.7 million worth of MSTR dilution to truthfully say it bought a little BTC, it didn’t buy BTC with $1.44 billion of its $1.4781 billion in MSTR dilution.
Instead, it simply diluted MSTR for USD.
In contrast to Saylor’s normal goal of accretive dilution, the company started to worry about its upcoming cash obligations for servicing debts and dividends. It now claims to be building a “USD Reserve,” which is just another term for “cash” that we can add to Saylor’s dictionary of invented terminology.
Worse, Strategy diluted MSTR at a negative, basic multiple-to-Net Asset Value (mNAV) below 0.9x and a meager, enterprise value mNAV of 1.17x.
This metric of investor confidence has crashed by two-thirds from 3.4x in November 2024.
Read more: S&P 500 declines to add Strategy again
Strategy EPS is down with the price of bitcoin
The world’s largest digital asset treasury company, Strategy holds 650,000 BTC worth $55 billion. Its average cost basis is $74,436 per BTC.
Although that cost basis seemed conservatively low earlier this year amid optimism about Donald Trump’s endorsement of BTC, his presidency hasn’t been good for investors. Year to date, BTC has lost 11% of its value, and MSTR has amplified those losses with a 45% slide.
Strategy derives a special type of earnings on unrealized gains and losses on its BTC holdings, which are obviously negative at current prices.
Its reduced EPS guidance better reflects the reality of the bear market in BTC.
Finally, although Saylor and other executives at Strategy have repeatedly broadcasted their intention to never sell BTC, they have changed their tune on that promise in recent weeks.
Strategy recently tweeted about “dividend coverage” from possible BTC sales, and CEO Phong Le spoke about possible BTC sales if the Enterprise Value mNAV of MSTR were to sustain a sub-1x multiple amid dividend obligations.
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