Strategy (formerly MicroStrategy) is going through a tough time on the public market. Over the past 27 trading sessions, the organization's market capitalization has shrunk so much that it has fallen out of the top 300 largest US public companies. As of the 586th day of observation, Strategy ranks only 310th, losing 77 positions in a month.
At the time of data recording, the company's market capitalization was approximately $33.39 billion, with a share price of $92.10. This is a notable decline, considering that not long ago MSTR was among the leaders in capitalization growth rates due to its aggressive bitcoin accumulation strategy.
What is behind the decline?
An analysis of Strategy's asset structure shows that the company holds $56 billion in assets, of which $53 billion is in bitcoin and only $3 billion is in cash. At the same time, the balance sheet carries significant liabilities: $22 billion in nominal debt and credit obligations, including $6.7 billion in debt and $15 billion in loans. After deducting debt and preferred securities, the company's net equity is approximately $34 billion.
The drop in the ranking coincided with pressure on the stock: MSTR shares lost about 2.68% in a day, which pushed the company lower on the list. Even with a large bitcoin reserve, Strategy proved vulnerable to investor revaluation.
Comparison with ranking neighbors
For contrast, consider the company Venture Global, which holds net assets of $10.7 billion and earned $4.8 billion in net profit last year. Its debt amounts to 73% of the cost of fixed assets, and it trades at a price-to-book ratio of 3.1. On the observation day, its securities rose by 9.15%.
An even more illustrative example is Twilio. The company holds net assets of $7.7 billion and earned $250 million in net profit, trading at a price-to-earnings ratio of 326. However, 55% of Twilio's net assets are goodwill, i.e., a premium above the value of real assets that the company paid during acquisitions: $5.2 billion out of $9.5 billion. If goodwill is excluded, the company's real net assets amount to only $2.5 billion, and the adjusted price-to-book ratio rises to 13.2.
We see a similar picture with Jabil: excluding goodwill and intangible assets, the company has more liabilities than assets, despite a net profit of $1 billion.
My comment: Strategy's decline in the ranking is not just a market correction, but a signal that investors are beginning to more soberly assess the risks associated with the company's dependence on a volatile asset. As long as bitcoin is rising, MSTR looks attractive, but with any significant decline in the cryptocurrency, the company risks entering a zone of turbulence where its capitalization will fall faster than that of more diversified peers.