By 2024, the stock market has seen a parade of stock splits, spurred by the high-flying (and highly speculative) artificial intelligence (AI) sector and the fading threat of inflation, rendering expensive stocks more affordable to buy if they divide the stocks into more affordable pieces. The computer chip manufacturer Nvidia split its stock 10-for-1, and Chipotle Mexican Grill – yes, the burrito chain – announced it will split its stock 50-for-1. The communications semiconductor company Broadcom split its stock 10-for-1. None of these changes altered shareholder value, but they made it easier for people to buy shares, because the par value of the shares fell.
MicroStrategy has announced a 10-for-1 stock split (a time-dilation effect that has not been seen since its split into 60-for-1 in 2004 and, before that, a 21-for-1 in 2002) that goes into effect on 1 August this year. Part of MicroStrategy’s motivation for the split is its impressive investment strategy in Bitcoin. As one might imagine, the stock’s price has risen an incredible 1000-plus per cent in the past four years (currently trading at about $1,310 per share before the split) and has been bolstered by strong Bitcoin performance; this is a company that says it has ‘generated approximately $1.5 billion of net income and $2.1 billion of Adjusted EBITDA since 13 September 2020, and most of such net income and Adjusted EBITDA is solely attributable to convertible debt issues that the company uses to purchase bitcoin’. In other words, the split is intended to make its stock more affordable and accessible to the masses.
More to the point, steep Bitcoin prices powered by self-perpetuating market cycles and by Bitcoin ETFs – not to mention Bitcoin futures – seem to portend a rosy future for MicroStrategy’s financial approach. For prospective investors, buyer beware – Bitcoin remains a volatile currency, and MicroStructure’s stock price remains highly correlated with Bitcoin. Meanwhile, The Motley Fool Stock Advisor didn’t pick MicroStrategy as one of its Top 10 stocks – diversification might be good for rookies as much as veterans.
Source: Yahoo! Finance
