Shares of MicroStrategy (MSTR) are now 90% cheaper

Shares of MicroStrategy ( MSTR ) started trading at just $131 at the open on Thursday, down 89.4% from the previous day’s closing price.

The price change is not due to a market crash or massive sell-off, but is the result of a previously announced “stock split” that has now become permanent.

MicroStrategy’s stock division

A stock split is when a company increases its number of outstanding shares by issuing new shares to all current shareholders in exact proportion to their current holdings.

Last month, MicroStrategy announced that shares of MSTR will undergo a 10-for-1 stock split after trading ends on August 7, with investors receiving an additional nine shares for every share they own from on August 1

With this influx of new supplies, individual stock prices naturally soared once trading began on Thursday in a split adjustment. However, each investor’s stake in the company ultimately remains the same, while the “barrier to entry” to gain exposure to MicroStrategy has been significantly lowered.

“A stock split is designed to make the stock price more affordable for new investors,” Bitcoin educator Rebecca Goodwill wrote on Twitter Thursday. She continued:

“While a stock split won’t make you rich overnight, it’s a sign that the company has outperformed the market, the stock price needs a reset (and) the company is is preparing for its next phase of growth.”

MicroStrategy Price (MSTR). Source: Bitcoin Holdings by TradingView MicroStrategy

A day before the split, MSTR shares were trading at $1,246 each. Earlier this year, the price hit a two-decade high of $1,919, spurred by the rise in the price of Bitcoin following the launch of US Bitcoin ETFs on January 11.

MicroStrategy today has 226,500 BTC on its balance sheet worth $13.12 billion at forex prices. Meanwhile, the company’s market cap is $25.4 billion, according to Yahoo Finance, roughly double that number.

The company has acquired its Bitcoin stash by leveraging the capital markets, including issuing new shares and selling cheap debt.
Before the company announced its first Bitcoin purchase in August 2020, its stock was trading at $123 per share, roughly the same price as it is today, but before any form of stock split.

Other companies like Semler Scientific and MetaPlanet have since adopted MIcroStrategy’s playbook by making Bitcoin the core of their corporate balance sheets. Unlike MicroStrategy, MetaPlanet recently conducted a 1-for-10 reverse stock split, increasing its stock price 10X.

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