Strategy’s incredible shrinking bitcoin purchases
What shall we do with a shrunken Saylor?
The bloom has come off Michael Saylor’s rose.
In the world of bitcoin, no company has captured the public imagination quite like Strategy (née MicroStrategy). Under its executive chair, this erstwhile business software vendor has reinvented itself as a bitcoin investment vehicle. Its pivot in August 2020 from software to “stacking sats” has delivered a 23-fold gain for stockholders, and pioneered the idea of bitcoin treasury companies, inspiring more than 170 imitators. With over 640,000 bitcoin — about 3 per cent of the entire supply — Strategy is a genuine whale in the crypto ocean.
Yet since the unveiling of its so-called 21/21 capital strategy in late October — a plan to raise an eye-watering $42bn to buy more bitcoin — the company’s shares have lagged the very asset they are meant to outperform. So far in 2025, bitcoin has risen 22 per cent compared to just a 9 per cent gain in Strategy, an extraordinarily large “tracking error” by any measure. The stock still trades at a premium of roughly 1.4 times the company’s net asset value, but that premium has shrunk from over three times in November, suggesting mounting market unease.
The tension may sharpen with its most recent SEC filing. On Monday, Strategy disclosed a further $22.1mn purchase of bitcoin at an average price of $113,048.
Typical Saylor, on the face of it —“Always Be Stacking,” he tweeted yesterday, echoing Alec Baldwin’s legendary tirade in the 1992 film Glengarry Glen Ross — even if the purchase size is much smaller than normal.
But the same 8-K filing also revealed the company had raised $128.1mn (mostly from selling common stock), leaving a gap of about $106mn.
That $106mn did not go into bitcoin. Instead, it will today be channelled into dividend payments owed on four classes of perpetual preferred stock.
The yawning gap between money raised and bitcoin purchased exposes the circularity of Saylor’s business model. Other than the legacy software arm — which generates little, if any, cash — the company sells no product or service. Its main output is its own securities, chiefly common stock. In effect, the company has transitioned from SaaS (software-as-a-service) to DaaS (dilution-as-a-strategy).
With no operational free cash flow to cover preferred dividends, Strategy must keep issuing new common shares to raise funds. It is the corporate equivalent of diluting common Peter to pay preferred Paul. The result is a system that subordinates ordinary shareholders twice over. They not only rank behind $8.2bn of convertible bondholders and $6.6bn of preferred stockholders in the event of any liquidation, but also shoulder the burden of financing the dividends that prop up those preferred instruments.
Saylor and his supporters talk of a financial “flywheel” and the “torque” generated by this structure, designed to magnify gains for common holders if bitcoin appreciates. But what we actually see is dilution and subordination, value structurally redirected from one stakeholder group to another.
In short, an investment in Strategy reflects a multi-layered bet: on bitcoin itself, on the enduring premium to net asset value of its stock, and on the survival of a model that depends on constant newcomers to service Strategy’s own obligations. Above all, it’s a bet on Michael Saylor’s ability to untether the common stock from the relentless drag of its own dilution.