Michael Saylor doubles down on Bitcoin as Strategy sits on $14 billion in unrealized losses

Critics warn that Strategy’s financial structure is collapsing under the weight of rising dividend costs and shrinking cash reserves, yet Michael Saylor has reiterated that he will not abandon his Bitcoin strategy.

Unrealized losses on Strategy’s Bitcoin reserve have climbed up around $14 billion following Bitcoin’s decline to below $60,000.

Does Strategy’s financial strategy still work? 

Strategy, the largest corporate holder of Bitcoin with 847,363 BTC, now trades below the value of its Bitcoin holdings.

When Strategy’s stock was trading at a premium to its Bitcoin holdings, the company could afford to issue new shares, buy more Bitcoin, and increase the amount of Bitcoin per share for existing investors.

Michael Saylor, Strategy’s executive chairman, used this method repeatedly to build Strategy’s massive Bitcoin pile. This premium justified the stock price and kept the cycle going. But now, with the stock trading below the value of its Bitcoin, issuing new equity at a discount destroys Bitcoin per share instead of building it, making it harder for the company to raise money through stock sales.

Meanwhile, Strategy’s preferred stock, known as STRC, which was designed to trade around its $100 par value, recently dropped to roughly $75.7, more than 20% below that target. The company tried to fix this by raising the interest rate on these shares seven times in a row, from 9% to 11.5%.

But even that has not brought the price back up. Buyers who purchase at current prices get an effective yield of around 14.4%, which is nearly 300 basis points above the stated rate.

Annual dividend payments across Strategy’s preferred shares have grown from $300 million to $1.2 billion in just six months, according to CryptoQuant’s head of research, Julio Moreno. 

Over that same period, the company’s cash reserves fell by roughly 38%. Dividend coverage has collapsed from more than seven years to only about 14 months, meaning the company only has enough cash on hand to cover its dividend payments for about a year.

In what many called the first signs of a crack, Strategy recently sold 32 BTC for $2.5 million to help fund a dividend payment, breaking Saylor’s long-standing promise to never sell his company’s Bitcoin. He has remained defiant on X, posting that “volatility tests every capital structure.”

Saylor said the company remains focused on Bitcoin and “disciplined capital allocation” among other things. Bitcoin dropped below $59,000 soon after before recovering above $60,000, putting the company’s unrealized loss above $14 billion.

Is Strategy in danger of collapsing? 

While Strategy is not in an immediate crisis, the company’s future depends almost entirely on Bitcoin’s price.

Economist and long-time Bitcoin critic Peter Schiff has been vocal about the situation. He pointed out that MSTR shares have dropped 81% from their all-time high, hitting $103 on June 23.

Schiff argued that if the stock keeps falling, Saylor’s best option would be to sell Bitcoin to buy back stock. However, such a large sale could crash the price of Bitcoin, wiping out any benefit from the buyback. “That’s the box Saylor put himself in.” Schiff wrote.

Cryptopolitan reported that CryptoQuant’s CEO Ki Young Ju also challenged Saylor’s approach, saying that “buying whenever capital is available is not a strategy.” 

His firm recommended that Strategy develop a plan for timing its Bitcoin purchases and take some profits during price rallies instead of just buying constantly. Moreno, the head of research at CryptoQuant, suggested that Saylor should pause Bitcoin purchases and rebuild cash reserves first.

Saylor has rejected this advice and maintains that Strategy will keep buying Bitcoin regardless of the price. His position is that the current downturn is just temporary volatility and that long-term value will win out.

Arkham, a blockchain analytics firm, stated they believe the current situation is not a crisis for Michael Saylor because the dividend payments on Strategy’s STRC preferred stock are optional.

Strategy faces a roughly $1 billion debt payment in 2027, and CryptoQuant estimates the company needs about $2.8 billion in cash over the next two years to get its dividend coverage back to normal levels.

Whether Saylor can hold his position depends almost entirely on Bitcoin’s price recovering above the firm’s $75,646 average cost basis, a level roughly 26% above where Bitcoin trades today.

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