Analysis: Michael Saylor's Bitcoin Flywheel Questioned, Strategy's Preferred Stock Financing Model May Have a "Death Spiral" Trap

Odaily Planet Daily News Despite Bitcoin's recent decline dragging down the stock price of Strategy (MSTR), the company's current market value still trades at roughly a 31% premium over its underlying net asset value. Analysts suggest this premium was historically driven by market confidence in Michael Saylor's "Bitcoin value appreciation flywheel" model. However, as this model falters, the premium faces further compression risk.

According to estimates, Strategy currently holds approximately 844,000 Bitcoin, valued at around $51.1 billion based on a price of $60,500 per coin. Combined with its software business and cash assets, total assets amount to roughly $53.6 billion. After deducting liabilities including approximately $6.7 billion in convertible bonds and $15.5 billion in preferred stock, net assets attributable to common shareholders stand at about $31.8 billion. As of June 5th, the company's market capitalization was still $41.6 billion, roughly $10 billion above its net asset value.

Since 2025, Saylor has aggressively financed Bitcoin purchases by issuing preferred stock, increasing the company's total debt and preferred stock obligations from about $6.9 billion to $21.8 billion. The outstanding preferred stock has reached $15.5 billion, requiring approximately $1.5 billion in annual dividend payments. However, the company's cash reserves amount to only about $1 billion, making it difficult to cover these expenses over the long term.

Furthermore, Strategy's outstanding share count has increased from 98 million shares before its first Bitcoin purchase to 353 million shares, a surge of 250%. If Bitcoin's price falls to $50,000, the company's net asset value could drop to around $23 billion. In a scenario where the premium disappears, the theoretical decline in MSTR's stock price could significantly exceed the drop in Bitcoin itself.

Analysts believe that to cover the growing preferred stock dividends, Strategy may need to continue issuing more preferred stock or even sell a portion of its Bitcoin holdings in the future. This could create a negative cycle of "issuing preferred stock - paying dividends - further fundraising," known as a "Death Spiral." (Fortune)