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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
First, let’s give Michael Saylor his due. His pivot from enterprise software to bitcoin bingeing represents one of the most profitable capital markets decisions of all time.
Since August 2020, (Micro)Strategy’s stock has surged by 25 times, while bitcoin has climbed “only” tenfold. Not bad for a guy who lost his fortune and nearly his company in the dotcom era with an accounting restatement, a 99 per cent share price collapse, and SEC fraud charges (settled for millions of dollars, with no admission of wrongdoing).
But it feels like the magic is fading.
Recall that back in November, FT Alphaville wrote about the company’s voracious appetite for fresh capital. Since our first post, the stock has fallen from around $357 to $351 at yesterday’s close, with wild gyrations along the way, including a peak of $543 on 21 November. Yet during that time, bitcoin has rallied by 25 per cent, taking it from $88,000 to around $111,000.
Of course, different time periods will yield different results. For the year-to-date, Strategy and bitcoin have performed in line; however, over the last month, Strategy’s underperformance has been quite stark:
The irony is striking. For the company has kept HODLing and buying, adding 353,000 bitcoin in this period and reinforcing its status as the largest corporate holder of bitcoin — with 3 per cent of total supply. However, over the past nine months, owning the corporate vehicle designed to leverage that bet has been worse than owning the underlying asset.
The previously successful treasury strategy seems now to be preventing stockholders from fully participating in the very bitcoin rally they are funding. In fact, the rush of stock sales by Strategy insiders in November 2024 appears to have been well-timed.
And you can’t blame bad luck for Strategy’s soggy performance; virtually everything has worked in the company’s favour. Strategy has joined the Nasdaq 100 index, accounting changes has turned its unrealised gains into GAAP profits (which could lead to inclusion in the S&P 500), and the Trump Administration has been rolling out the red carpet for digital assets. Yet Strategy’s stock can’t quite get out of its own way.
The faithful are showing early signs of restlessness. For the first time in years, a segment of Saylor’s loyal online base is questioning him because the company diluted (pun intended) previous guidance about new stock sales. In late July, Strategy pledged not to sell stock when its market value fell below 2.5 times its bitcoin holdings (so-called “mNAV”, which stands for market-to-net asset value).
That promise lasted about two weeks before management decided it needed “greater flexibility”. Now the company can issue stock at far lower levels. Some critics felt betrayed, because it looked like Saylor was winging it rather than executing a disciplined plan.
(Revised guidance on 18 August 2025)
Actually, the shift is a concession to reality more than anything else. As Strategy’s most recent 8-K shows, last week’s $357mn bitcoin purchase was funded mostly by selling common stock, with two of the four flavours of perpetual preferred stock instruments covering the rest.
The preferreds pay high dividend coupons, and the legacy software business doesn’t even come close to generating the cash to pay them. Strategy therefore gets trapped in a recursive loop: it must issue new securities — whether common stock or other preferreds — to service the dividends on the old securities it issued to buy bitcoin (zoomable version).
From that angle, Saylor’s policy tweak makes pragmatic sense. There’s no point in abiding by an arbitrary 2.5x mNAV threshold when your stock trades at a much lower premium (Strategy’s stock is currently at 1.6x mNAV).
Issuing shares above net asset value is in effect printing money: every dollar raised buys more than a dollar’s worth of bitcoin, lifting bitcoin per share. So the extra flexibility from the revised guidance frees Strategy from an unnecessary straitjacket.
Yet there is a real cost. Each stock sale chips away at existing holders’ claim on the bitcoin stash. The premium over NAV is what makes Strategy’s strategy work, and it is gradually eroding. The question now is whether Saylor’s relentless salesmanship can keep that premium alive.
If the premium vanishes entirely, the model risks breaking. Issuing stock at or below NAV would be dilutive and self-defeating.
To be clear, the company faces no near-term existential threat. There are no margin calls, and the company has deftly termed out its debt. The first big test isn’t until September 2027 when investors have the right to force the company to repurchase $1bn of convertible bonds.
But it doesn’t have infinite time, either. Some $5bn of Strategy’s $8bn of convertible bonds are currently out-of-the-money, and if the stock doesn’t rise, those bonds won’t convert into equity. That means Strategy will need actual cash to repay the principal. Stock appreciation is a necessity for the model to work.
Seen this way, the uproar over the new issuance guidance misses the point. Equity sales are a symptom of a structure that must continually sell itself to survive. The system depends on two beliefs (or suspensions of disbelief, if you will): that bitcoin will always go up, and that investors will always pay a premium for Saylor’s version of it.
The (Micro)Strategy saga remains one of the most extraordinary stories ever in the capital markets. But the story is showing signs of decay as the stock loses momentum despite bitcoin’s strong performance.
Further watching:
