According to Forbes, MicroStrategy’s bitcoin-heavy strategy is facing serious pressure after bitcoin fell 35% from its October peak of $126,080 to $82,000 last week. The company’s shares have dropped 60% over the past year, bringing its market capitalization down to $49 billion—actually lower than the $56 billion value of the bitcoin it holds. S&P Global Ratings recently assigned MicroStrategy a B- junk credit rating, citing “high bitcoin concentration” and “weak risk-adjusted capitalization,” while JPMorgan analysts warned the stock risks removal from major indexes like MSCI USA and Nasdaq 100. CEO Michael Saylor is now pivoting to bitcoin-powered income instruments, issuing $8.6 billion in perpetual preferred securities with names like Strike, Strife, and Stride that pay fixed dividends between 8-10% annually.
The Premium Vanishes
Here’s the thing that’s really concerning: MicroStrategy’s entire business model was built on trading at a massive premium to its bitcoin holdings. For almost two years, the stock traded up to 190% above the value of its bitcoin treasury. That premium was the magic sauce—it let Saylor issue cheap equity to buy more bitcoin, which drove the premium even higher. It was a beautiful, self-reinforcing cycle. But now? That premium has completely evaporated. The stock actually trades below the value of its bitcoin holdings. So the primary funding mechanism that fueled this whole experiment? Basically gone.
The Credit Gamble
So what’s Saylor doing now? He’s pivoting hard into credit markets with these perpetual preferred securities. The selling point is that dividends are treated as “return of capital,” which means investors reduce their cost basis instead of paying taxes annually. That’s clever financial engineering. But the timing couldn’t be worse—these new preferreds are already trading below their $100 par value, with yields spiking to 11-12.5% as prices fall. And here’s the real problem: between preferred dividends and convertible interest, MicroStrategy now faces roughly $700 million in annual payments. That’s a massive fixed cost for a company whose entire revenue stream is tied to the most volatile asset on earth.
Contingency Plans
During the Q3 earnings call, CEO Phong Le outlined some contingency plans that sound… creative. They’re considering bitcoin derivatives like selling covered calls, using equity derivatives to enhance cash flow, or even selling high-basis bitcoin at a loss for tax advantages. They might follow Japan’s Metaplanet in doing share buybacks. But the billion-dollar question—would they ever sell bitcoin outright?—remains complicated. Their average purchase price is around $74,400, so they’re still in profit territory for now. The earliest real pressure point comes in September 2027 when $1 billion in convertible notes become repayable.
Amplification vs Leverage
Saylor’s now talking about “amplification” instead of leverage. In practice, this means issuing perpetual preferreds and equity-linked securities to grow purchasing power faster than debt loads. He wants 30% amplification annually, which he claims could reduce the company’s debt-to-bitcoin ratio from 11% today to zero by 2029. Some true believers think he’s creating a new credit market—comparing it to early gold-backed credit markets. The theory is that fixed-income managers who can’t buy bitcoin directly might embrace these preferred stocks. But bond buyers are inherently more cautious than the volatility-loving traders who fueled MicroStrategy’s rise. This feels like Saylor’s riskiest bet yet, and the financial engineering is getting increasingly complex. When your corporate strategy depends on convincing inherently conservative credit investors to embrace bitcoin volatility… well, let’s just say this will be fascinating to watch.