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By late last week, the sudden drop in Bitcoin\u2019s price was crushing shares of Strategy, controlled by the signature crypto currency\u2019s most famous champion and beneficiary, Michael Saylor. What\u2019s gone mainly unnoticed: Strategy\u2019s still selling at a big premium to the underlying value of its assets, almost entirely parked in Bitcoin, less the multiple-billions it effectively owes to borrowers and holders of its preferred stock. That extra lift appears to be a vestige of Saylor\u2019s past sorcery in getting his stock\u2019s value racing far faster than the price of Bitcoin, a dynamic that enabled him to keep raising the tokens investors \u201cowned\u201d per share in a kind of magical \u201caccretion\u201d game.<\/p>\n
But that wizardry disappeared months ago as the scenario flipped and Strategy shares tumbled at a pace multiple times the retreat for the coins that are practically its sole holding. Hence, it\u2019s something of a mystery that investors are still paying way more for Strategy shares than what it would reap by selling all of its assets, and paying off its liabilities and preferred shares. Put simply, if the Saylor boost disappears, Strategy\u2019s stock would fall way below where it sits today. It\u2019s the Michael Saylor math problem that practically no one\u2019s talking about.<\/p>\n
Strategy holds 844,000 Bitcoin, worth $51.1 billion at today\u2019s quote of $60,500. Strategy also operates a software franchise that was its prime business before Saylor started buying crypto in Q3 of 2020. In 2025, it garnered just $477 million in revenue and lost roughly $40 million. Its sales are stuck at the levels of late 2010s. So it\u2019s more than fair to give software the same value it enjoyed then, around $1.5 billion. In addition, Strategy\u2019s disclosed that it harbors around $1 billion in cash, actually a dangerously low amount, but still a plus on the balance sheet. All told, Strategy\u2019s salable and liquid assets total approximately $53.6 billion (the $51.1 billion in Bitcoin plus $1.5 billion for the software legacy arm, and $1 billion in cash).<\/p>\n
If Strategy were to liquidate, how much of the proceeds would go to the common shareholders? In a filing issued on May 16, Strategy stated that if held $6.7 billion in debt, all in convertible bonds. It further disclosed that it had capitalized on a drop in the bonds\u2019 prices to repurchase converts at an 8% discount on the open market. So we\u2019ll take 8% off the issue price of the $6.7 billion to reflect where they\u2019re trading, and conclude that Strategy owes a total of just under $6.2 billion. The big one is preferred stock, a source for buying Bitcoin that Saylor\u2019s been gorging on since early 2025. The same document reveals that Strategy\u2019s got $15.5 billion outstanding in that security. Though it\u2019s officially equity, preferred stock is funding extended by \u201ccreditors\u201d that a company needs to repay before it can return cash to common shareholders. The net they would receive, then, is the $53.6 billion for the assets, minus the total of $21.8 billion in debt and preferred stock. That net number is $31.8 billion.<\/p>\n
It\u2019s hard to see why Strategy\u2019s stock should be selling for more than what would go to the folks and funds that own its stock if it unloaded all it owns, its Bitcoin cache and software arm, and used the proceeds to repay what it owes. But on June 5th, Strategy\u2019s market cap, representing the value for common shareholders, was $41.6 billion, ten billion more than what appears to be its bedrock worth. Somehow despite Strategy\u2019s travails, the Saylor Magic Premium\u2019s got legs, and now stands tall at an astounding 31% (the $41.6 billion cap divided by its fundamental \u201cnet asset value\u201d of $31.8 billion).<\/p>\n
Until the start of 2025, Saylor shrewdly restrained Strategy\u2019s leverage by relying on his high-flying stock to amass Bitcoin. Even early last year, the company had $6.2 billion in bonds outstanding and $730 million in preferred stock, so it effectively \u201cowed\u201d just $6.9 billion. Since then, that\u2019s number\u2019s mushroomed over three-fold to the current $21.8 billion. Accounting for virtually all that increase is the ramp of around $15 billion in preferred stock offerings.<\/p>\n
By \u201cborrowing\u201d so heavily to buy Bitcoin\u2014and by the way, Strategy paid over $100 a coin on average last year\u2014Saylor has magnified the percentage fall in his share price for every like decrease in Bitcoin. For example, if Bitcoin falls to $50 or 17% from today\u2019s level of around $60, Strategy\u2019s fundamental value would drop to roughly $23 billion (over $44 billion in Bitcoin, cash and software less than $21.8 billion in debt and preferreds).<\/p>\n
Where would that put the stock price? Here\u2019s where its second <\/em>major math problem starts to bite big time, and it\u2019s stupendous dilution. Since it started purchasing Bitcoin, Saylor\u2019s taken the share count from 98 million to 353 million, a jump of 3.5x or 250%. That\u2019s eight times the 30% increase posted by the second ranked large market cap player for growing its stock outstanding, furniture-maker Wayfair.<\/p>\n At $50 Bitcoin, Strategy\u2019s shares, by the basics, should sell at $63, its $22.4 billion net asset value for common shareholders, divided by the immense float of 353 million shares. The 17% fall in Bitcoin would trigger a 46% drop in Strategy from today\u2019s $117.<\/p>\n Careful readers will note that I made an important new assumption: I forecast that the Saylor Magic Premium disappears. In fact, it wouldn\u2019t be surprising to see Strategy sell at a discount. The reason: Saylor\u2019s made Strategy a far dicier bet since its now paying $1.5 billion a year in dividends on the preferred, where it was out just $35 million annually when relying on convertible bonds. Its cash hoard of $1 billion will cover less than a year of those payments. It would appear that Saylor\u2019s only option is issuing more preferreds, further raising its annual cash outflow. The ever mounting payments funded by still more issuance of preferred shares threatens a death spiral.<\/p>\n That leads us to another reason the Saylor Magic Premium should probably go negative. In early June, Saylor famously sold $3.2 million in Bitcoin to help pay a preferred stock dividend, <\/strong>violating his \u201cno sales ever\u201d pledge. Investors hated the move, sending shares sharply lower. If Saylor keeps selling more and more preferred shares to cover those dividends, he\u2019ll have to dump a lot more Bitcoin. Having the greatest name in crypto, the figure who always seems to make a big buy every time his prize token drops, start exiting could shock Bitcoin believers and cause heavy selling. It\u2019s unclear Saylor could sell a big chunk of his coins at anything like their value on the books. <\/p>\n For years, Saylor created a risk-reward equation that appeared to work brilliantly. Now, the risks are swamping the rewards.<\/p>\n<\/div>\n #Michael #Saylors #preferred #stock #gamble #trigger #death #spiral #Strategy<\/p>\n","protected":false},"excerpt":{"rendered":" By late last week, the sudden drop in Bitcoin\u2019s price was crushing shares of Strategy, controlled by the signature crypto currency\u2019s most famous champion and beneficiary, Michael Saylor. What\u2019s gone… <\/p>\n","protected":false},"author":1,"featured_media":6406,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[95,1307,2238,1101,1414,683,8840,2264,8841,6700,91,127,3738],"class_list":["post-6405","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-news","tag-bitcoin","tag-cryptocurrency","tag-death","tag-finance","tag-gamble","tag-michael","tag-microstrategy","tag-preferred","tag-saylors","tag-spiral","tag-stock","tag-strategy","tag-trigger"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/6405","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6405"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/6405\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/6406"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6405"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}