Analysis: Michael Saylor's Bitcoin Flywheel Faces Renewed Scrutiny, Strategy's Preferred Stock Financing Model May Harbor a "Death Spiral" Trap

Odaily Planet Daily News: Although Bitcoin's recent decline has dragged down the stock price of Strategy (MSTR), the company's current market capitalization still holds a premium of approximately 31% over its underlying net asset value. Analysts believe this premium stems from the market's past recognition of Michael Saylor's "Bitcoin appreciation flywheel" model. However, as this model shows signs of faltering, the associated premium faces further downside risk.

According to estimates, Strategy currently holds approximately 844,000 Bitcoin. Valued at $60,500 per coin, this amounts to roughly $51.1 billion. Combined with its software business and cash assets, the total assets stand at about $53.6 billion. After deducting liabilities, including approximately $6.7 billion in convertible bonds and $15.5 billion in preferred stock, the net asset value attributable to common shareholders is around $31.8 billion. However, as of June 5th, the company's market capitalization was still $41.6 billion, approximately $10 billion higher than 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 approximately $6.9 billion to $21.8 billion. The preferred stock balance alone has reached $15.5 billion, requiring annual dividend payments of about $1.5 billion. However, the company's cash reserves are only around $1 billion, making it difficult to sustainably cover these expenditures long-term.

Furthermore, the number of Strategy's outstanding shares has increased from 98 million before its Bitcoin purchases to 353 million, a surge of 250%. If Bitcoin's price drops to $50,000, its net asset value could fall to approximately $23 billion. In the absence of the current premium, the theoretical decline in MSTR's stock price could significantly exceed the decline in Bitcoin itself.

Analysts suggest that to cover the growing preferred stock dividends, Strategy may need to continuously issue more preferred stock or even sell a portion of its Bitcoin assets in the future. This could form a negative cycle of "issuing preferred stock to pay dividends, then seeking further financing," otherwise known as a "Death Spiral." (Fortune)