Strategy: Earnings Sing Praises Of Preferred Financing

Summary Strategy continues its Bitcoin-focused treasury model, raising capital to buy BTC and functioning as a leveraged bet on ￰0￱ trade at a premium to BTC holdings per share, making MSTR highly sensitive to Bitcoin price ￰1￱ stock approach reflects their improved credit rating but presents risks of long-term dividend expenses that must be supported with further ￰2￱ a Hold rating, as the risk/reward profile remains unchanged and no compelling case exists to ￰3￱ Inc ( MSTR ) just released Q3 earnings . Intriguingly, they made a much more of a case to buy their preferred stock instead of their ￰4￱ the premium to NAV, I'm not enticed to buy either, and I maintain my previous Hold ￰5￱ of Previous Thesis When I covered Strategy in February, I examined their Bitcoin USD ( BTC-USD ) treasury model, which coincided with their rebranding from MicroStrategy to ￰6￱ to this model is what their Executive Chairman, Michael Saylor, had dubbed "BTC Yield." Screenshot from previous thesis (FY 2024 Company Presentation) Strategy raises capital (by selling shares or convertible securities) to acquire ￰7￱ to Saylor, an effective yield occurs when their BTC holdings accumulate at a faster rate than their share dilution, effectively making MSTR a leveraged bet on ￰8￱ previous software business, which is now a tiny part of the picture, still covers operating expenses, so Saylor suggests that MSTR also function like a zero-expense BTC fund in the form of a C-corp.

I had some misgivings about how this approach works, and I compared it to another investment fund in the body of a C-corp, Berkshire Hathaway Inc. ( BRK. A )/( BRK. B ): I think, however, that coining terms like "BTC yield" overcomplicates what is a simple ￰9￱ know that one of Berkshire's biggest holdings is The Coca-Cola Company ( KO ).

Suppose Berkshire realized that its shares were worth twice (or more) the value of its portfolio and began selling more BRK to accumulate more ￰10￱ how strange it would be if they described this as "KO yield." MSTR shares also traded at a large premium to the value of their BTC holdings per share, and so I felt it made little sense to initiate a position, particularly as a decline in BTC would likely have a magnified effect on MSTR's stock ￰11￱ the company did not face serious or immediate dangers, however, there was no case to bet against it either, and I rated the stock a Hold. Year-To-Date Results In the course of the year, MSTR's relationship to BTC has been clear, rising and falling with it, but typically in a more exaggerated ￰12￱ ￰13￱ YTD Price Returns (Seeking Alpha) Prior to Q3's results, BTC was up 14.4% YTD, while MSTR was down 6.8%.

It is peculiar that they often move together, but MSTR is nevertheless down. Q3 2025 Earnings Presentation This pertains to the declining premium to book value or the "mNAV." For several months, mNAV has been ￰14￱ is partly a product of MSTR's NAV per share growing, suggesting that their BTC accumulation is working out well, but clearly, the market has still been pricing the stock down as ￰15￱ onto Q3 results and the earnings call , Strategy showed continued progress on their BTC accumulation. Q3 2025 Earnings Presentation Management pointed to YTD accumulation exceeding dilution to produce a "BTC yield" of 26%. Balance Sheet (October 2025 Form 8K) For reporting purposes, the latest balance sheet shows YTD growth of $23.9B of BTC assets to $73.2B by the end of ￰16￱ we saw, BTC did not grow nearly that much, so this mostly reflects active ￰17￱ can also note that long-term debt did not grow nearly as much, reflecting their reliance on different forms of ￰18￱ Sheet (October 2025 Form 8K) The other parts of the balance sheet show that both preferred and common equity have been raised to fund this ￰19￱ preferred stock offerings include: Strategy Inc 10.00% SER A PERPETUAL STRIFE PFD STK ( STRF ): 10% ￰20￱ Inc 9.0% SERIES A PERPETUAL STRETCH PREF STK ( STRC ): Variable ￰21￱ Inc 8.00% SERIES A PERPETUAL STRIKE PFD ( STRK ): 8% ￰22￱ Stride Preferred Stock ( STRD ): 10% ￰23￱ preferred stock offerings have been a signature part of their activities in 2025, with STRC being their latest issue, offered in the third ￰24￱ Holdings and Shares Outstanding (Q3 2025 Earnings Presentation) In terms of BTC owned, Strategy ended the quarter with ₿640,808.

On a fully diluted basis and based on recent prices, this would make MSTR's BTC per share worth about $214. Outlook and Valuation During the call, most of the management's discussion was about their preferred securities and efforts to make use of this financing strategy going ￰25￱ of Convertible Debt (Q3 2025 Earnings Presentation) Their use of convertible notes will be phased out, with no outstanding issues beyond ￰26￱ will either be repaid or converted. Management's reason was simple: preferred financing is less ￰27￱ to pay interest on a note is a credit default, while failing to pay a dividend isn't. MSTR's B- S&P Rating (Q3 2025 Earnings Call) The existing notes have accomplished their basic task: proving that there was a market for MSTR-related fixed income and earning them an S&P credit ￰28￱ preferreds will now be issued to meet that ￰29￱ correctly, convertible preferred stock should allow MSTR to achieve levered returns on BTC, accumulating faster than they ￰30￱ believes that several developments in 2025 support continued upside for BTC: Passage of the GENIUS ￰31￱ of BTC by big banks as capital and ￰32￱ by investment ￰33￱ of BTC ￰34￱ of the crypto derivatives ￰35￱ elephant in the room is that MSTR's software business is minuscule here; the company lacks operating cash flows to sustain dividend ￰36￱ explicit strategy is to use proceeds from common stock offerings to pay dividend expenses as needed.

Currently, annual interest and dividend expenses are $689M, which exceeds their Q3 cash ￰37￱ NAV and Multiple (Q3 2025 Earnings Presentation) The current mNAV is ￰38￱ on October 30th's closing price, this suggests the current NAV per share is about $188. Considering both tailwinds, risk factors, and the mNAV, I continue to think MSTR isn't a buy right ￰39￱ also spent most of the call pitching the strengths of the preferred stocks, which is interesting for an earnings ￰40￱ the one hand, I think it diminishes the appeal of the ￰41￱ the other hand, it shows how dependent the business is on ￰42￱ can talk about the speculative nature of BTC itself, but let's set that aside for a ￰43￱ could create enhanced upside with its approach, but this also exposes it to vulnerabilities that don't exist for a straight investment in ￰44￱ I were to invest, I'd want to get as close to NAV as possible, so I think investors should seek that entry price in order to manage their ￰45￱ Strategy is improving its risk profile by transitioning out of debt securities and into preferred ￰46￱ gives it space for levered returns that don't lead to a potential default.

Nevertheless, they are dependent on BTC appreciating, well-timed acquisitions, and well-timed sales of ￰47￱ risks don't warrant a premium to NAV, and for that reason, I maintain my Hold rating.