Strategy has allocated $1.44 billion to ensure it can meet its upcoming dividend and interest obligations. Over the past several months, the company has borrowed heavily and issued various forms of preferred stock, financial instruments that come with strict payment requirements.
One example is Stretch, a perpetual preferred share that pays an annual 10.75% dividend, distributed monthly. These products offer attractive yields to investors, but they also create significant long-term commitments for the company.
At the core of Strategy’s financial strategy is founder Michael Saylor’s conviction that the price of Bitcoin will continue rising at a faster rate than the company’s debt-related outflows.
How Strategy raises capital: understanding mNAV
Strategy typically raises new capital at a premium, basing these decisions on the company’s modified Net Asset Value (mNAV).
This metric compares:
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the market value of the Bitcoin held on the balance sheet
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the company’s market capitalization
When Strategy trades significantly above the value of the Bitcoin it holds, it can issue new shares at favorable prices. The proceeds from those share issuances are then used to buy even more Bitcoin, a cycle Saylor has often described as “Bitcoin-powered corporate leverage.”
During the recent bull market, investor enthusiasm pushed Strategy’s stock price to nearly $460 per share this past summer. However, since then, the stock has dropped to around $170, pulling the company’s mNAV down to 0.865. During the previous rally of the stock, mNAV has been between 2.5 and 3, which gave Strategy a large cushion to raise capital profitably.
A significantly lower mNAV means raising new equity becomes much more difficult and less favorable for existing shareholders.
Fears of forced Bitcoin selling
Given the company’s growing debt load and preferred dividend obligations, some analysts worry Strategy may eventually need to sell Bitcoin to meet payments. This is a highly sensitive topic because Strategy is widely viewed as a “corporate Bitcoin vault,” and any indication of forced selling could impact market sentiment far beyond the company itself.
To address these concerns, Strategy is now building a cash reserve explicitly designed to cover its obligations without relying on Bitcoin sales. The company’s traditional software operations, while still generating revenue, are not profitable enough to service its debt on their own. As a result, Strategy recently issued new shares to raise cash for interest and dividend payments, a short-term solution that becomes increasingly risky when the stock price declines.
With the newly created reserve, Strategy can cover roughly one full year of required payments. The long-term goal is to maintain two full years of liquidity on hand.
Strategy’s Bitcoin position and updated price outlook
Strategy currently holds 650,000 BTC, the largest corporate Bitcoin treasury in the world.
The company has purchased its Bitcoin at an average price of $74,436 per coin, spending a total of $48.38 billion.
At current market prices, the stash is worth approximately $58.5 billion, giving Strategy around $10 billion in unrealized gains. However, the company’s market capitalization now stands at about $52.2 billion, meaning the stock is trading at a discount relative to the value of its Bitcoin holdings alone.
This discount exists before considering Strategy’s remaining software business, which continues to generate revenue. In the third quarter, the software division posted:
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$128.7 million in revenue
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$90.7 million in gross profit
While small compared to the Bitcoin balance sheet, these operations remain an important part of the company’s long-term identity.
Interestingly, Strategy has also revised its Bitcoin year-end price forecast, cutting its target from $150,000 down to $85,000–$110,000. This adjustment reflects increased market volatility and a more cautious macroeconomic outlook.
A new threat: potential index exclusion
On the horizon, a new challenge is emerging. MSCI, one of the world’s largest providers of equity indexes, is considering excluding Digital Asset Treasury Companies from its indices. These are companies whose primary business model is raising capital to purchase and hold crypto assets, a category that would include Strategy.
If MSCI decides to remove these companies from its indexes, the consequences could be significant:
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Many institutional investors and ETFs track MSCI indexes.
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Index removal would force these funds to sell Strategy shares.
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This could trigger billions of dollars in capital outflows.
For a company already navigating high leverage, volatile Bitcoin prices, and shrinking equity premiums, such an event could introduce substantial additional pressure.
A high-risk, high-conviction strategy
Strategy’s approach has always been bold: leverage corporate finance tools to acquire as much Bitcoin as possible, under the belief that Bitcoin will outperform every other asset over the long term.
This strategy has worked remarkably well in bull markets, but it becomes far more dangerous during periods of price stagnation or decline.
By setting aside $1.44 billion, Strategy is attempting to reassure investors, stabilize its balance sheet, and buy time until the next major Bitcoin rally. Whether that rally arrives soon enough remains the central question.
