Michael Saylor’s company, Strategy, has attracted attention in recent years with its aggressive Bitcoin accumulation strategy.
Company management argues that the company can remain financially viable even if the price of Bitcoin falls to $8,000. However, calculations suggest the situation could be very different for ordinary shareholders.
Bitcoin’s decline of more than 40% in the last six months, and its fall below $63,000, has brought the balance sheet of Strategy, the world’s largest institutional Bitcoin treasury, back into the spotlight. In particular, the resilience of its MSTR common shares to the sharp declines in Bitcoin price has become a subject of debate.
Currently, Strategy’s equity structure includes a total of $16.672 billion in preferential liabilities over common shares. Of this, $8.214 billion is debt and $8.459 billion is preferred shares. Although preferred shares do not have a maturity date, they hold priority over common shares in the event of a potential bankruptcy.
The company is also required to pay approximately $896 million annually in interest and dividends. This does not include salaries, legal obligations, operating expenses, and other costs.
Strategy’s assets include 717,722 Bitcoin, $2.25 billion in cash, and a small-scale software business. In a scenario where the Bitcoin price is $63,270, the total asset value reaches approximately $47.65 billion. However, the company’s software operations have shown weak performance in terms of both revenue and profitability in recent years.
Calculations show that if the Bitcoin price falls below $20,094, the total value of the company’s Bitcoin and cash assets will equal its $16.672 billion liabilities, which consist of debt and preferred shares. Below this level, bondholders and preferred shareholders would have exhausted the company’s entire treasury.
In this scenario, MSTR common shares theoretically retain no value in terms of company assets. The shares are reduced to a purely option-like expectation value, tied to the possibility of Bitcoin rising again in the future.
Strategy management frequently shares metrics such as “Bitcoin per share” or multiples relative to net asset value. However, the company’s legal documents clearly state that neither ordinary nor preferred shareholders have a direct repurchase or ownership right over the company’s treasury. Therefore, shareholders’ claims to the Bitcoin reserve are purely theoretical.
Therefore, declines in Bitcoin price directly affect not only the balance sheet size but also the hypothetical value upon which MSTR shares are based.
Michael Saylor argues that the company could continue operating even if the Bitcoin price fell to as low as $8,000. However, calculations show that the threshold at which ordinary shareholders would lose their economic stake in the company’s treasury is much higher, around $20,000.
*This is not investment advice.
