America's Most Shorted Stock: Strategy's High-Stakes Bitcoin Bet

Goldman Sachs names Strategy Inc. the most shorted large-cap US stock as its Bitcoin holdings show $8.2B in unrealized losses, despite its 100th BTC purchase.

A recent analysis from Goldman Sachs has identified Strategy Inc., formerly known as MicroStrategy, as the most heavily shorted large-cap equity in the United States. This development comes at a critical juncture for the company, which has just announced its 100th Bitcoin acquisition. The firm's substantial cryptocurrency holdings are currently showing unrealized losses estimated at $8.2 billion, a figure that continues to grow.

Mounting Pressure and Institutional Skepticism

The company's stock has faced significant downward pressure, declining by 5.6% on Monday alone. This marks the fifth consecutive week of losses, with the share price having shed 24.6% over that period. The growing bearish sentiment is reflected in its new position atop Goldman Sachs' short interest ranking for large-cap stocks, measured by short interest relative to market capitalization. Notably, Strategy was not among the top 50 names on this list just one year ago.

Several institutional investors have reduced or completely exited their positions. Angeles Wealth Management and Wealth Watch Advisors are among those who have liquidated their holdings.

The 100th Purchase and a Deepening Loss

On February 23, Strategy disclosed in an SEC filing that it purchased 592 Bitcoins for approximately $39.8 million. The transaction was financed entirely through the sale of nearly 298,000 of the company's own shares. The average purchase price was $67,286 per Bitcoin, which sits above the current market price of around $64,600.

This latest acquisition brings Strategy's total Bitcoin treasury to 717,722 coins. These were acquired at an average price of $76,020 each, representing a total investment of $54.56 billion. Executive Chairman Michael Saylor highlighted the milestone as the firm's 100th Bitcoin transaction since initiating its strategy in August 2020.

The financial impact, however, is stark. With Bitcoin trading near $64,600, the company's unrealized losses have ballooned to roughly $8.2 billion. This represents a sharp increase from $6.1 billion just a week prior and $4.2 billion at the beginning of February.

Diverging Views on Wall Street

Despite the challenging backdrop, analyst sentiment remains predominantly positive. Fourteen out of sixteen covering analysts maintain a "buy" recommendation on the stock. However, price targets have been slashed considerably in recent weeks:
* Mizuho reduced its target to $320.
* BTIG cut its target from $630 to $250.
* Canaccord Genuity lowered its target from $474 to $185.

Tom Lee, an analyst at Fundstrat, offered a counterpoint to the prevailing short thesis. He warned that when a short position becomes a consensus trade, negative news is often already priced into the stock. This scenario, he noted, could create conditions for a violent short squeeze and a sharp upward move.

Core Risks: Dilution and Dependence

A fundamental concern for investors remains Strategy's method of funding its Bitcoin purchases. The company does not use operational cash flow for these acquisitions. Instead, it consistently issues new shares, leading to the dilution of existing shareholders. Furthermore, Strategy retains significant capacity under several at-the-market (ATM) equity programs, which provide a mechanism to raise additional capital by selling more shares.

The path forward appears inextricably linked to Bitcoin's price performance. Market observers suggest the coming weeks will be decisive, determining whether the cryptocurrency rallies sufficiently to alleviate pressure on Strategy or whether the growing cohort of short sellers will be proven correct. The situation remains highly volatile.