Strategy: Almost Time To Be Greedy When Others Are Fearful

Summary MicroStrategy remains a HOLD even after its correction, as its shares trade at an 8% premium to its Bitcoin holdings (mNAV 1.08), lacking a margin of safety to upgrade to BUY. MSTR's investment thesis is tied almost entirely to Bitcoin, with software operations now negligible; earnings are largely irrelevant beyond BTC metrics. However, I think we may be approaching the time to upgrade MSTR to a BUY. If its mNAV drops below 1, it would be an opportunity vs. direct Bitcoin exposure. Bankruptcy risk is low in the near term due to long-dated, low-cost debt and sufficient liquidity, but sustained BTC weakness could stress the balance sheet eventually. Historically, MSTR has outperformed Bitcoin if bought at times when it traded at or below mNAV = 1. I am keeping a close eye on it. Personally, I am not a fan of the idea of Bitcoin ( BTC-USD ) treasury companies, nor of any other crypto treasury company. At the time of writing, I have no exposure to companies such as Strategy Inc ( MSTR ) or Bitmine Immersion Technologies, Inc. ( BMNR ) - an Ethereum ( ETH-USD ) treasury company that recently also invested in a famous YouTuber. The reason is that I do not fundamentally see any reason why these companies should trade at a premium against their mere holdings. I have described this idea in most of my past coverage on MSTR, arguing that none of the financial or marketing tools Strategy introduced are enough to justify buying a box of Bitcoin worth $100 at any premium. Yet, with Bitcoin at 40%+ from its All-Time-High, sentiment is rapidly changing, and Strategy may soon start trading at a discount against its holdings. In this regard, I think we are rapidly approaching the time of being greedy when others are fearful. Q4 Earnings: Nothing Unexpected, My Focus Is On mNAV Premium Strategy is a fairly unique company in that earnings results are relatively meaningless for an investment thesis. This is a result of the following two dynamics: The company having to report their BTC paper losses/gains following mark-to-market accounting principles. This creates an “artificial” loss or gain that is relatively meaningless considering the company does not intend to actually sell their BTC stack. The underlying software business being at this point dwarfed by MSTR’s Bitcoin focus. Any change in Strategy’s software business (which has been stagnant for almost a decade at this point) barely impacts the company, whose future is tied to Bitcoin. It is no surprise, then, that CEO and founder Michael Saylor mostly outlines what he refers to as “BTC metrics” when talking at earnings calls (see below picture). Michael Saylor's Tweet on Q4 earnings (X.com) Of particular importance is the concept of “BTC Yield,” which in simple words outlines the growth of how much Bitcoin shareholders are entitled for each of their shares. When buying MSTR, investors are effectively “asked” to start thinking in Bitcoin terms and not in fiat terms (if they did, the sole idea of diluting shareholders to buy BTC would be enough to make any investment nonsensical). Investors effectively buy a box worth $100 of Bitcoin that trades at a premium, with the reasonable expectation their BTC “stake” will grow in the future. At the time of writing, MSTR’s $100 BTC box is priced at $108 (MSTR’s mNAV is 1.08). At its current BTC Yield of 22.8% per year, it would take an investor ~4.3 months to recover the premium they are paying and be “entitled” to $108 worth of BTC via their MSTR shares. Historically speaking, this figure is not bad. Back in February 2025 , an investor would have had to wait more than 4 years to see their BTC share match their price of purchase of an MSTR share (back then, the premium was around ~1.6-1.7). Yet, I do not believe it is the time to buy MSTR just yet. That time will come only when the mNAV drops below 1. Buying Under mNAV Strategy’s Bitcoin Holdings currently stand at 713,502 BTC with an average cost basis of $76,052 (for a total cost of ~$54.2 billion). At Bitcoin’s price at the time of writing (~$67,000), the company has a “paper loss” of roughly $6.5 billion. Historically, Strategy started trading at an mNAV discount during BTC bear markets, especially when it started reporting paper losses on their holdings. MSTR vs. BTC (Seeking Alpha) MSTR has, in fact, only outperformed Bitcoin when bought in timeframes when it traded at or close to mNAV = 1. Given I am personally not entirely convinced about MSTR’s treasury strategy (see here ), I would only feel like recommending it as a BUY again once its mNAV is below 1. That, I believe, would provide a sufficient margin of safety behind the simple assumption that eventually, the “box” of Bitcoin will need to trade at its fair value. This thesis is rooted in basic market efficiency theory, with one big risk: the possibility that MSTR could go bankrupt. This is what I will cover next. Can MSTR Go Bankrupt? Not easily One of the main risks of an investment in MSTR is linked to the company’s exposure to Bitcoin (which is at this point its main focus). The question is whether the company could go bankrupt as a result of Bitcoin falling and, if so, on what timeline. Strategy has the following financial position at the time of writing (sources are Seeking Alpha and Strategy’s earnings reports): Approximately $8.2 billion in total debt, primarily in convertible notes with very low or zero interest rates. There are no maturities until 2028-2030, reducing near-term refinancing pressure. About $5.8 billion in preferred stock, contributing to annual fixed payments of ~$854 million (including ~$824 million in dividends and $30 million in debt service). Other liabilities for around $15-15.5 billion, including debt, preferreds, and other obligations. ~$2.3 billion of cash equivalents, plus ~$1.4B in non-BTC assets. This provides a ~2-3 year runway for ~$854M annual fixed payments (including interest and dividends, which may be cut in times of distress) without selling Bitcoin. Other Assets: Non-BTC assets (cash, software IP, etc.) valued at ~$1.4-2 billion. Mathematically, Strategy does not face any immediate insolvency risk. That’s a function of its debt being low-cost and skewed towards long-term expiration, most of its BTC being unpledged and the underlying software operations covering basic expenses. In fact, Strategy’s dividend payments are reported as amounting to $888 million per year on their website at the time of writing. In a worst-case scenario, MSTR could cut its dividend to $0, and it would be able to cover all their operating expenses thanks to the underlying software business (based on current metrics). For MSTR to actually face bankruptcy, we would need to see a sustained BTC weakness that goes to the point of severely limiting capital raises (e.g., via equity dilution) and strain liquidity overall. I estimate the company could be under stress if BTC started trading in the $20,000 - $25,000 range. At those prices, the entire stack of Bitcoin held by MSTR would be worth less than the company’s net liabilities (~$15.5 Billion) and dangerously close to Strategy’s sole $8.2 billion in total debt. Other Risks: Only Consider MSTR If You Believe In Bitcoin If Bitcoin were to trade in the $20,000-$25,000 range by the time most of Strategy’s debt comes to maturity (end of this decade), it would represent the ultimate bear scenario. In such a scenario, Bitcoin would have spent roughly a decade at the same nominal price levels. This, in my view, would mean that the asymmetric bet on Bitcoin becoming a new global reserve asset would have failed. This is the fundamental reason why only people that are bullish on Bitcoin long term (and willing to take this asymmetric bet) should consider exposure to MSTR. Another risk concerns potential distress well before Bitcoin reaches $15,000 - $25,000. Famous investor Michael Burry, who recently tweeted about BTC Technical Analysis and meme stocks , warned of a "death spiral" risk for companies invested in BTC. He argued that at the $50,000-$70,000 level, MSTR could already be in distress due to miner contagion and capital access limits. Bitcoin trades below $70,000 at the time of writing. Finally, another risk entirely concerns the possibility that MSTR may never trade again at a mNAV discount. In other words, a perfect entry point into MSTR may never manifest. If the bottom price of Bitcoin is already in, MSTR may recover, and so will its mNAV premium. Whether MSTR would go and outperform Bitcoin from current levels remains to be seen. Conclusion For Bitcoin exposure, I generally prefer buying an ETF like the iShares Bitcoin Trust ETF ( IBIT ) than any Bitcoin treasury company. I simply yet have to see a fundamental reason why I should choose to buy a box worth $100 of BTC for $110+. That’s why I downgraded MSTR to a HOLD back in early 2025, when it started trading at a significant mNAV premium. This said, there is a notable exception. I think when Treasury companies are punished through bear markets, and their mNAV drops below 1 (i.e. they trade at less than the value of their holdings), Alpha can be made. MSTR currently still trades at a slight mNAV premium, at 1.08 at the time of writing. So, it is not yet the time to buy it and “get greedy.” I think those who have it in their portfolio at this stage might as well HOLD it. If the BTC bear market continues and Strategy’s mNAV drops below 1, I will update my recommendation to a BUY or potentially a STRONG BUY.