MicroStrategy Backtracks on Shareholder Dilution Promise
Just two weeks ago, MicroStrategy made a firm commitment to shareholders: it wouldn’t issue new shares below 2.5 times its net asset value (mNAV) unless it was to cover interest payments or dividends. Fast forward to today, and that promise has quietly evaporated.
Founder Michael Saylor posted an updated policy this morning, adding a new, loosely worded exception—dilution is now allowed whenever the company decides it’s “advantageous.” The shift was buried in a revised investor slide, replacing the previous hardline stance with vague corporate-speak about “flexibility.”
It’s a sharp pivot, and one that leans heavily on the standard disclaimer in their earnings reports: “Actual results may differ.” In other words, things change.
Why mNAV Matters
MicroStrategy isn’t your typical company. Investors don’t value it based on earnings or revenue—instead, they look at its massive Bitcoin holdings (currently worth around $73 billion) and assign a premium based on how efficiently it accumulates more. That premium is measured by mNAV, which right now sits at 1.62.
For years, the company’s playbook was straightforward: raise money through debt or preferred shares (without diluting common stockholders) and use that cash to buy Bitcoin. That strategy kept shareholders happy because it meant their stake wasn’t being watered down.
But sometimes, MicroStrategy *does* dilute shares directly to fund Bitcoin purchases. Executives spin this as “accretive dilution”—selling shares at a high enough mNAV that the Bitcoin bought per share still increases. The problem? It chips away at the mNAV itself. And if investors lose faith in the company’s ability to grow Bitcoin holdings without dilution, that premium could vanish.
The Broken Pledge
Back in July, MicroStrategy tried to reassure shareholders by promising not to issue new shares below 2.5x mNAV—unless it was for interest or dividend payments. That gave some comfort, especially as mNAV has dropped from its 2024 highs.
Now, that reassurance is gone. Saylor’s new wording adds a third, wide-open scenario: dilution is fair game whenever management thinks it’s “advantageous.” There’s no definition of what that means, leaving plenty of room for interpretation.
The original, clear-cut language on their investor slides has been swapped out for something far murkier: *”We believe shareholders benefit from management flexibility.”* It’s the kind of phrase that sounds reasonable until you realize it could justify almost anything.
For a company that’s built its reputation on aggressive Bitcoin accumulation, this move might not shock longtime observers. But for shareholders banking on that July promise, it’s a reminder that even the clearest guidance can change—especially when Bitcoin’s involved.
