On July 31, MicroStrategy (MSTR) announced its clear commitment not to issue new shares at a price below 2.5 times the adjusted net asset value (mNAV), except for what is used to pay interest and dividends.

But this morning, founder Michael Saylor completely changed this policy, granting himself the right to dilute shareholder stakes (issue new shares) "whenever the company sees fit."

This decline was primarily based on the usual warning in earnings reports stating that "actual results may differ materially from forward-looking statements."

MicroStrategy and Bitcoin

MicroStrategy is considered the largest Bitcoin treasury company in the world, owning $73 billion worth of BTC. Unlike most companies, investors evaluate its stock (MSTR) not based on traditional earnings, but on a multiple of asset value (mNAV).

The company finances Bitcoin purchases through issuing debt and preferred shares with returns, and this method does not dilute shareholder equity and increases the value of the Bitcoin held by the company.

However, at times, the company resorts to issuing new common shares directly to buy Bitcoin, which is referred to as "accretive dilution" because it increases the amount of Bitcoin per share – but at the same time reduces the value of mNAV itself.

Currently, the value of mNAV is approximately 1.62, meaning that the company's market value is 62% higher than the value of what it owns in Bitcoin.

From 2.5x to "whenever we wish"

Over the past two years, mNAV has sometimes reached over 3.4, but it has halved since November 2024.

To calm investors, management had previously promised not to dilute (issue new shares) below 2.5x mNAV, except to cover:

Debt interest (valued at $8.2 billion),

Dividends for holders of preferred shares (STRK, STRF, STRD, STRC).

However, Saylor announced today via platform X that this commitment is no longer in effect. He added a new and vague clause allowing for share dilution as well "whenever it is appropriate for the company."

Flexibility is more important than commitments

In the latest presentation, the company replaced its clear commitment with a general statement saying:

"We believe that shareholders benefit from management's flexibility in executing its strategies in the capital markets."

In other words, MicroStrategy now retains the right to issue new shares even at levels below 2.5x mNAV, not only to repay debts or distribute dividends but also whenever it sees fit for its financial strategy.

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