Strategy Falls Below the Value of Its Own Bitcoin, Testing the Treasury Model

Strategy, the software company that became a bitcoin holding vehicle under Michael Saylor, the executive who made it the model for corporate bitcoin buying, has reached a point it spent four years insisting it would avoid. Its enterprise value has fallen below the market value of its bitcoin, a condition analysts describe as enterprise mNAV falling below 1, according to CoinDesk. The market now values the company's roughly 843,706 bitcoin more highly than the entire firm.

The strategy that made the company successful worked in only one direction. When the stock traded above the value of its coins, the company could issue new shares, buy more bitcoin, and increase the bitcoin backing each remaining share. Below 1, that process works in reverse. Issuing equity to buy bitcoin would dilute existing holders rather than benefit them.

The pressure now comes from the preferred stock. Strategy pays dividends on several series of preferred shares, including the STRC series with an 11.5% yield, and those obligations have grown toward an estimated $1.2 billion a year. STRC has traded below its $100 par value, a sign that investors doubt the dividends are comfortably covered. In late May the company sold 32 bitcoin to meet those payments, after holding its bitcoin without selling for four years.

Zach Pandl, head of research at the asset manager Grayscale, argued that a larger sale, of around $3 billion, could restore confidence rather than spread fear by showing the company can service its obligations. Saylor responded firmly, posting that "Bitcoin is working today. So are we."

The situation tests a structure that other treasury companies copied. They borrow money or issue preferred stock against a volatile asset and rely on a lasting premium to keep refinancing. With bitcoin below $60,000 and that premium gone, the story of unstoppable accumulation no longer matches the reality on its balance sheet.