MicroStrategy Shares Drop 30% After Nasdaq-100 Inclusion Announcement
MicroStrategy (MSTR) shares fell over 8% to just above $300 on Monday, marking a decline of approximately 30% since their Nasdaq-100 index inclusion announcement and nearly 50% from their late November peak.
Stock Performance Overview
The stock price soared to $543 in late November, representing an eight-fold increase in 2024 and more than a 50-bagger since the company's bitcoin (BTC) purchases began in August 2020. Founder Michael Saylor became increasingly prominent in financial media, promoting Bitcoin and MicroStrategy's performance indicators, such as "bitcoin yield," reminiscent of metrics from the late 1990s internet bubble.
Saylor also teased substantial new bitcoin purchases before official regulatory filings, indicating confidence in the company’s strategy. While few companies adopted a similar approach to holding bitcoin as a primary treasury asset, several small-cap firms, including Semler Scientific and Metaplanet, began embracing this strategy in 2024.
Theoretical Insights
George Soros's Theory of Reflexivity explains how investor perception influences prices, creating cycles where rising stock prices enable cheaper capital raises, further boosting earnings and stock prices. This cycle is evident in MicroStrategy's trajectory in 2024. However, Herb Stein's Law states that unsustainable trends will eventually halt, applicable to MicroStrategy's recent performance.
Current Market Position
After announcing its Nasdaq-100 inclusion on December 14, MicroStrategy's stock declined about 30% from around $430 to $300. The stock peaked at $543 on November 21 but showed signs of weakness despite bitcoin's rise above $108,000. Currently, MSTR has experienced a 45% drop from its peak over five weeks, yet remains over 400% higher year-to-date and about 20-fold since Saylor's initial bitcoin investments.
While bearish observers may suggest further declines, bullish perspectives highlight that past corrections have typically resolved positively for MSTR. Soros might argue that price movements can exceed expectations in both directions.