Key Takeaways:
- Significant Decline: Shares of business intelligence firm MicroStrategy (MSTR) have plummeted by more than 50% over the past year, reflecting the high volatility of its core asset, Bitcoin.
- A Bitcoin Proxy: The company has become widely known as a “crypto treasury,” with its stock performance closely tied to the price fluctuations of Bitcoin.
- An Alternative Investment: Amid the common stock’s turbulence, some investment professionals suggest that MicroStrategy’s preferred securities could present a more stable opportunity.
- Different Risk Profile: These preferred shares are designed to appeal to investors seeking a different risk-to-reward balance compared to the high-stakes nature of the company’s common stock.
MicroStrategy’s Stock Woes Continue
MicroStrategy (MSTR), the software company turned major Bitcoin holder, has seen its stock take a beating over the last year. Shares have tumbled by more than half their value, causing significant concern among investors who bought into its aggressive cryptocurrency strategy. The slide directly mirrors the downturn in the crypto markets, reinforcing MSTR’s status as a de facto proxy for Bitcoin.
This tight correlation is by design. Led by co-founder and chairman Michael Saylor, MicroStrategy has poured billions into acquiring Bitcoin, making it the centerpiece of its corporate treasury. While this strategy led to massive gains when crypto prices were soaring, it has also resulted in amplified losses during market slumps. For many, the volatility of MSTR stock has become too “scary” to handle.
Is There a Safer Way to Invest in MSTR?
For investors wary of the extreme highs and lows of MicroStrategy’s common stock, an alternative may be hiding in plain sight: the company’s preferred securities. While the common stock offers a direct, leveraged bet on the price of Bitcoin, the preferred stock presents a different proposition.
Preferred shares are a type of hybrid security that combines features of both stocks and bonds. They typically pay a fixed dividend, offering a more predictable income stream than common stocks, which may or may not pay dividends. This structure can be particularly appealing during times of market uncertainty.
A Different Structure for a Different Investor
According to market analysts, Michael Saylor’s financial strategy for the company has included creating “debt and preferred structures that appeal to different investors’ risk/reward” profiles. This suggests a deliberate effort to offer various ways to invest in the company beyond a simple bet on its common shares.
By investing in the preferred stock, individuals can gain exposure to MicroStrategy’s underlying business without being fully subjected to the day-to-day volatility of Bitcoin. While the value of these securities is still linked to the company’s overall financial health, their structure is designed to provide a cushion against the sharp price swings that have come to define MSTR’s common stock.
As Bitcoin continues its backslide, investors are reminded of the inherent risks in crypto-linked assets. For those who believe in MicroStrategy’s long-term vision but can’t stomach the current turbulence, exploring its preferred stock might be a worthwhile consideration.
Image Referance: https://www.barrons.com/articles/mstr-stock-price-preferred-buy-sell-19eb6900?gaa_at=eafs&gaa_n=AWEtsqdufcGmWfKMlVBtRyfTL1Qx9AlbQmH2sKwBv_PQNZyl5D36NaAohMgg&gaa_ts=692452d6&gaa_sig=Xah5Y3xYFwYXrs1BYwJqKk7Urcf-PLcNfkt6G7LMB1QvHqkGgtTYKJwPNyOvglLlv5PU3Vr3pqufRoWrdpZYQA%3D%3D