Bitcoin’s Dramatic Fall Puts Strategy’s Holdings in Crisis Mode! What Happens Next?

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Markets

What to know:

  • Despite all the chaos, Strategy’s balance sheet remains remarkably unruffled- for now. The real drama, however, lies a year and a half down the road, when the first put option on the company’s convertible notes can be exercised. 🕰️
  • Performance has become a tale of two cities, with the STRF and STRC series living the high life, comfortably above their issue prices, while STRK and STRD are dragging their feet well below their launch levels. 😬
  • Management has several strategies at hand should bitcoin continue its mood swings, though pulling the trigger on any of them will surely turn off future capital-raising opportunities. Talk about a catch-22. 🤷‍♂️

As Bitcoin’s value nosedives, the calls for liquidation of Strategy (MSTR) are growing louder than a brass band at a funeral. With the company’s stock plummeting nearly 70% from last year’s high, some are questioning whether the firm can keep up with its financial obligations. 😱

Throughout 2025, Strategy has relied on its perpetual preferred stock as the magic wand to fund its bitcoin spree, while using at-the-market (ATM) common share issuance to mostly cover its preferred dividends. A real financial juggling act, to say the least. 🎪

Under the watchful eye of Executive Chairman Michael Saylor, the company issued four U.S.-listed preferred series throughout the year:

  • Strike (STRK), paying an 8% fixed dividend, convertible into common stock at $1,000 per share. ✨
  • Strife (STRF), offering a 10% non-cumulative dividend, the big cheese of the preferreds. 🍷
  • Stretch (STRC), the newbie on the block, debuted in August at $90 with a 10.5% fixed dividend and now trades just a hair above its offer price. 🏃‍♂️

As of Nov. 21, STRK is sitting at around $73, offering an 11.1% yield but down 10% since its launch. STRD has been the weakling, struggling at $66 with a 15.2% yield and a 22% total return loss. But never fear! STRF is still partying above issue, trading at $94 and delivering a tidy 11% gain. 💰

Nearly Back to Breakeven

With Bitcoin’s recent dive, everyone’s now eyeing the magical $74,400 mark, which-if breached-would push Strategy into the red for the first time in its five-year bitcoin binge. 📉

But before you start buying tissues, let me assure you, a drop below $74,400 won’t trigger any margin calls or force the company to sell off its precious BTC stash. So, let’s all take a collective breath. 😌

The real financial pressure cooker arrives in September 2027 when the holders of the $1 billion 0.625% convertible senior notes get their first crack at the put option. 🍿

Back when MSTR was a hot stock at $130.85, these notes were priced, with a conversion price set at $183.19. But now that the stock is hovering around $168, it’s unlikely that holders will convert. Instead, they’re more likely to demand cash, which will force Strategy to either raise funds or liquidate assets. Fingers crossed for a miraculous stock surge before 2027. 🤞

Multiple Levers Remain

Even if the mNAV (the fancy term for the valuation premium to Bitcoin holdings) crumbles into a depressing discount, Strategy still has some tricks up its sleeve to cover the annual preferred dividend bill. 🧙‍♂️

It could issue more common shares via ATM offerings, sell off small bits of its bitcoin stash, or even pay dividends in-kind with new stock. What a treat for the shareholders! 🎁

But before you start celebrating, know this: While the dividends aren’t at immediate risk, any of these moves would undoubtedly shake investor confidence to its core. This would likely put the kibosh on any future capital-raising efforts for new bitcoin purchases. A real pickle. 🥒

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2025-11-23 00:38