Bitcoin is no longer the main strategy of this company, nor of those emerging Bitcoin treasury companies; you are.
Author: Emil Sandstedt
Translation: Deep Tide TechFlow
It has been six months since I first published a report on the company then known as MicroStrategy (now renamed Strategy). In addition to changing its name, the company has expanded the variety of its financial products, further accumulated Bitcoin, and encouraged many companies to follow Michael Saylor's strategic model. Today, Bitcoin treasury companies seem to be everywhere.
It is time for an update, as we will explore whether the operations of these Bitcoin treasury companies align with the predictions in the initial report and once again attempt to summarize where all of this will ultimately lead.
Alarm Bells Ringing
Last December, this company seemed almost invincible: its Bitcoin yield key performance indicators (KPIs) accumulated at an incredible annual growth rate of over 60%, and optimism was high. It is no wonder that most of the arguments carefully articulated in the report released at that time were either mocked, ignored, or maliciously challenged, with calls to short the stock. The stock price, measured in dollars or Bitcoin, is essentially flat compared to that time, and there is currently almost no evidence to support the predictions.
Unfortunately, few understood or even realized the most important conclusion in my report from last December—it concerns the source of Bitcoin yields. Therefore, we will reiterate the issues with this metric for the company and why this should raise alarms for any serious investor.
Bitcoin yield—that is, the growth per share of Bitcoin—is actually flowing from the pockets of new shareholders to old shareholders.
Many new shareholders buy stock hoping to also receive high Bitcoin yields, but these yields either come directly from the record-breaking ATM (at market price) issuance of Strategy common stock or indirectly from purchasing shares borrowed from neutral hedge funds that hold the company's convertible bonds (which are then sold). This is precisely the Ponzi aspect of the company's operations—publicly boasting Bitcoin yields far exceeding any traditional earnings while concealing the fact that these yields do not originate from the sale of the company's goods or services, but rather from new investors themselves. They are the source of the yields, and the harvesting of their hard-earned money will continue as long as they are willing to provide funding. The scale of this harvesting is proportional to the degree of confusion, which can be measured by the premium of common stock relative to the company's net assets. This premium is cultivated and maintained through complex yet enticing corporate narratives, promises, and financial products.
Since the term "Ponzi scheme" has been frequently used over the past decade to attack the Bitcoin space, many Bitcoin enthusiasts have become accustomed to—and have reason to—completely ignore such criticisms.
But it must be made clear that even if a company within the Bitcoin space has intentionally or unintentionally constructed a Ponzi scheme, it does not mean that Bitcoin itself is a Ponzi scheme. The two are independent assets. Ponzi schemes have existed in the past when metals were the standard for currency, but that does not mean that precious metals themselves were ever or are currently Ponzi schemes. When I make this accusation against Strategy at this stage, I do so from a definitional perspective, not out of boring hyperbole.
Accumulation Continues
Before drawing further conclusions, we need to revisit the content of the initial report and outline the relevant decisions made by the company over the past six months.
On December 9 of last year, Strategy announced the purchase of approximately 21,550 Bitcoins for about $2.155 billion (an average price of about $98,783 per Bitcoin). This purchase was funded through the ATM (at market price) issuance from the famous "21/21 Plan" launched earlier that year. Just a few days later, the company purchased over 15,000 Bitcoins through ATM issuance and subsequently announced the acquisition of another approximately 5,000 Bitcoins.
By the end of 2024, the company submitted a proposal to shareholders to increase the authorized shares of Class A common stock from 330 million shares to 10.33 billion shares—a 30-fold increase. At the same time, the authorized shares of preferred stock were also increased from 5 million shares to 1.005 billion shares—a staggering 200-fold increase. While this does not equate to the total number of shares actually issued, it provides greater flexibility for the company's future financial operations, as the "21/21 Plan" is rapidly approaching its conclusion. By simultaneously focusing on preferred stock, the company can also explore another avenue for financing. By the end of 2024, Strategy held approximately 446,000 Bitcoins, with a Bitcoin yield of 74.3%.
Permanent Preferred Stock
At the beginning of the new year, Strategy submitted an 8-K filing, indicating that it was ready to seek a new round of financing through preferred stock. This new financial instrument, as its name suggests, will take precedence over the company's common stock, meaning that preferred stockholders have a stronger claim to future cash flows.
The initial financing target was set at $2 billion. During the preparation of this new tool, as of January 12, the company had accumulated 450,000 Bitcoins. By the end of the month, the company requested to redeem all convertible bonds maturing in 2027 and exchange them for newly issued stock, as the conversion price was now below the market price of the stock. For those "deeply profitable" Strategy convertible bonds, the largest buyers—funds engaging in gamma trading and neutral hedging—typically choose to convert early and subsequently issue new convertible bonds rather than hold the old bonds until maturity.
On January 25, 2025, the company finally submitted the prospectus for Strike Permanent Preferred Stock ($STRK). A week later, approximately 7.3 million shares of Strike stock were issued, stipulating a cumulative dividend of 8% with a liquidation preference of $100 per share. In practice, this means a quarterly dividend of $2 per share will be paid indefinitely, or will cease when the Strike stock is converted into Strategy stock (when the latter's price reaches $1,000). The conversion ratio is defined as 10:1, meaning that every 10 shares of Strike stock can be converted into 1 share of Strategy stock. In other words, this tool is akin to a dividend-paying perpetual call option linked to Strategy common stock. If necessary, Strategy can choose to pay dividends in the form of its common stock. By February 10, the company used the proceeds from the Strike issuance and the common stock ATM issuance to purchase approximately 7,600 Bitcoins.
On February 21, Strategy issued $2 billion in convertible bonds, maturing on March 1, 2030, with a conversion price of approximately $433 per share and a conversion premium of about 35%. With this financing, the company could quickly purchase about 20,000 Bitcoins. Shortly thereafter, the company released a new prospectus allowing for the issuance of up to $21 billion in Strike Permanent Preferred Stock, indicating that last year's already ambitious "21/21 Plan" seems to be evolving into a larger new plan.
The Controversy and Pace of Permanent Preferred Stock: The Arrival of Strife and Stride
After the company publicly announced its ambitious financing plan expansion, another new tool was introduced—perpetual preferred stock named Strife ($STRF). Similar to Strike, Strife plans to issue 5 million shares, offering a 10% cash dividend per year—paid quarterly—rather than the 8% cash or common stock dividend of Strike. Unlike Strike, Strife does not have a conversion feature but has a higher priority than common stock and Strike. Any delay in dividends will be compensated by future higher dividends, with a total annual dividend rate of up to 18%. At issuance, the initially planned 5 million shares seemed to increase to 8.5 million shares, raising over $700 million. Through common stock and Strike's ATM issuance activities, Strategy finally announced in March that its Bitcoin holdings exceeded 500,000. In April, regular ATM activities for common stock were primarily conducted until this financing method was nearly exhausted. Strike's ATM activities also continued, but due to potentially lower liquidity, the amount of funds raised was negligible. With these funds, Strategy's total Bitcoin holdings surpassed 550,000.
On May 1, Strategy announced plans to initiate another $21 billion common stock ATM issuance. This announcement came immediately after the initial ATM portion of the "21/21 Plan" was exhausted, fully validating the logic outlined in the previous report and on the X platform. Since any asset net value premium creates arbitrage opportunities for the company, management will inevitably continue to issue new shares that are overvalued relative to the underlying Bitcoin asset value to capture this premium. The issuance began almost immediately, allowing for the accumulation of more Bitcoins. As the fixed income portion of the initial "21/21 Plan" expanded due to the new preferred stock, investors now faced a massive "42/42 Plan," involving up to $42 billion in common stock issuance and $42 billion in fixed income securities issuance. May also saw the company submit a new application to the U.S. Securities and Exchange Commission (SEC) for a $2.1 billion Strife Permanent Preferred Stock ATM issuance. By the end of the month, all three ATM issuances were printing stock to purchase new Bitcoins.
In early June, the company announced another new tool: Stride ($STRD), a similar perpetual preferred stock asset to Strike and Strife, which is set to launch. Stride offers a 10% optional non-cumulative cash dividend, does not have a conversion feature, and has a priority lower than all other tools, only above common stock. Initially, just under 12 million shares were issued, valued at about $1 billion, paving the way for the company to add approximately 10,000 Bitcoins.
The Dazzling Puzzle of Bitcoin Treasury Companies
With the launch of STRK, STRD, and STRF products, and the full rollout of Strategy's "21/21 Plan," the overall picture of what has transpired over the past six months should be clearer.
In the initial report, I pointed out that the main logic of convertible bonds is not, as the company claims, to provide opportunities for the part of the market that needs and desires Bitcoin exposure. In fact, the buyers of the bonds are almost all funds employing neutral hedging strategies, who simultaneously short Strategy's stock, and thus never truly gain Bitcoin exposure. This is nothing but a scam. The real reason Strategy provides these securities to lenders is to create an impression of financial innovation targeting a trillion-dollar industry for retail investors, while further accumulating Bitcoin without diluting equity. As investors bid for common stock, the net asset price differential and the opportunity for risk-free Bitcoin yields also grow proportionally. The greater the economic confusion, combined with Michael Saylor's rhetorical skills and vivid metaphors, the greater the arbitrage opportunities the company can seize.
Over the past six months, by issuing three different types of perpetual preferred stock securities, along with various existing convertible bonds, these complex financial products can now create an appearance of financial innovation, further driving the bidding for common stock.
At the time of writing, the trading price of common stock is nearly double its net asset value. Considering the scale and activity of the common stock ATM issuance, this is an impressive achievement for the company's management. This means that Strategy can buy about two Bitcoins at the price of one Bitcoin in a risk-free manner.
In 2024, the company benefits from the popular "reflexive flywheel" theory, which posits that the more Bitcoin the company purchases, the higher its stock price will rise, thereby creating more opportunities to buy Bitcoin.
By 2025, this self-referential logic slightly shifts, evolving into a "torque" narrative, as reflected in the company's official description: the fixed income gears drive the core part of common stock, while Bitcoin yields are the product of this "mechanical apparatus." However, few investors seem to question where these yields come from and how they are generated, instead blindly celebrating this fictional dynamic.
Preferred stock is a financial asset and is not bound by physical laws. As an engineer, Saylor uses these fallacious analogies to make Bitcoin yields appear to stem from some form of financial alchemy, which is not surprising. However, since the company has no actual revenue and no real banking operations (the company borrows but does not lend), Bitcoin yields ultimately only derive from the Ponzi elements previously mentioned in the company's business model: attracting retail investors through a carefully crafted narrative, causing them to bid up the price of common stock, thereby enabling the opportunity for Bitcoin yields. As for those Bitcoin yields sourced from various debt instruments, they cannot yet be considered fully realized, as the debt ultimately needs to be repaid. Only the Bitcoin yields generated through common stock ATM issuance are immediate and final—this is the true profit.
The Bubble of Bitcoin Treasury Companies
Whether or not they realize that narratives cannot forever influence reality, the concept of Bitcoin yields from Strategy has rapidly spread among the management teams of many small companies worldwide. CEOs of various companies have witnessed insiders at Strategy amassing enormous wealth by continuously selling stock to retail investors, prompting them to begin emulating this model. The ongoing selling behavior of Strategy insiders can be verified by reviewing numerous Form 144 filings.
Many companies have successfully implemented this strategy, allowing management and old shareholders to profit at the expense of new shareholders. But this will all come to an end, as many companies, facing difficulties or even failures in their traditional core businesses, will turn to bold Bitcoin treasury strategies, becoming the first to have to sell Bitcoin assets to repay creditors when conditions worsen. Michael Saylor himself has admitted that he was in a state of desperation before discovering Bitcoin.
Metaplanet once operated under the name Red Planet Japan and struggled to achieve profitability in Japan's budget hotel sector.
Before Méliuz SA desperately turned to a Bitcoin acquisition strategy, it underwent a 100:1 reverse stock split.
Vanadi Coffee SA, which operates five cafes and a bakery in Alicante, Spain, was on the brink of bankruptcy, but after shifting to a Bitcoin strategy, its stock price seemingly miraculously increased.
The notorious meme stock company Trump Media & Technology has no revenue and is now seeking billions in funding to create a Bitcoin treasury company to save its historically low stock price.
Bluebird Mining Ventures Ltd is also in a state of desperation—at least from the stock price perspective—having recently decided to sell all its mined gold to fund its purchase of Bitcoin as treasury assets; as of the writing of this article, its stock price has risen nearly 500% in a month.
H100 Group, a small and recently struggling Swedish biotechnology company, has seen its investors achieve approximately 1,500% returns in a month, as Blockstream's CEO Adam Back provided funding for the company through some type of convertible bond to support its Bitcoin treasury strategy.
There are many such examples, but I believe they illustrate the point: the companies becoming Bitcoin treasury companies are not Microsoft, Apple, or Nvidia, but those on the brink of failure with no way out. Jesse Myers, a supporter of Strategy and a direct influencer of Michael Saylor's Bitcoin valuation model, has candidly stated:
“[…] MicroStrategy, Metaplanet, and Gamestop are all zombie companies. They all need to seriously examine themselves and admit that we cannot continue down the original strategic path. We must completely rethink how to create value for shareholders.”
These struggling companies have turned their gaze to Michael Saylor and his Strategy, believing they have found a clear path to wealth. By mimicking this so-called financial alchemy, they are now caught up in a massive transfer of wealth, and the bubble of Bitcoin treasury companies is heading toward its end.
When the Puzzle Shatters
Although Strike, Strife, and Stride are part of this impressive company puzzle, they have a higher priority than equity. The same goes for convertible bonds, not all of which are currently "profitable." Future free cash flows must always first satisfy the needs of these instrument holders before any remaining portion can be allocated to common stockholders. In good economic times, this is clearly not an issue, as the company's debt ratio is relatively low; but in poor economic conditions, the value of the company's assets can plummet while debt obligations remain—looming like a towering threat over any new creditors. Due to a phenomenon known as "debt overhang," any new creditors may hesitate to lend for the purpose of repaying other debt obligations. The initially intoxicating narrative and exaggeration may ultimately backfire on its creators.
All of this is exacerbated by the prolonged duration of the Bitcoin bear market. At that time, many struggling Bitcoin treasury companies will further exert selling pressure on their assets. In other words, the more popular Strategy's strategy becomes, the deeper the potential Bitcoin crash in the future, which could completely destroy the equity value of most companies that cling to this strategy until the last moment.
Conclusion: Michael Saylor likes Bitcoin. Like us, he prefers to have more Bitcoin rather than less. Therefore, it is extremely naive to think that he would allow the company's management to forgo an opportunity that is, by definition, an arbitrage.
When the trading price of common stock exceeds net asset value, the company can create risk-free profits for old shareholders by transferring wealth to buyers of newly issued stock. This behavior will continue, manifesting in larger-scale common stock ATM issuances, accompanied by some new, obscure "innovative products," even though the outside world may protest or express dissatisfaction over equity dilution.
Evidence of this viewpoint is that my prediction from March of this year has been validated: less than a month and a half later, the company announced a new $21 billion ATM issuance. If Strategy does not seize this arbitrage opportunity, then all imitators will rush to capture this opportunity to increase their Bitcoin reserves in the same risk-free manner. In this mad race for the expansion of arbitrage opportunities, the company will take on debt in various forms, with potential risks increasing accordingly.
In the next round of the Bitcoin bear market, Strategy's stock price will fall to—and ultimately drop below—net asset value levels, causing significant Bitcoin-denominated losses for investors who bought stock at a premium today. Today, the best action for Strategy's investors is to emulate the actions of the company and its insiders: sell the stock!
Bitcoin is no longer the main strategy of this company, nor of those emerging Bitcoin treasury companies; you are.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
