MicroStrategy, now rebranded as Strategy, is navigating a period of intense market scrutiny. Its stock has experienced a severe downturn, falling sharply from its recent highs. This decline stands in stark contrast to the underlying paper gains on its massive Bitcoin treasury, creating a complex and tense financial landscape for the company.
The Pressure of a Compressed Premium and Index Exclusion
The core of the current crisis lies in the evaporation of the stock’s premium. For years, MicroStrategy’s shares traded at a significant markup to the value of the Bitcoin it held. This premium was the engine of its strategy, allowing it to raise capital by issuing shares and use the proceeds to buy more Bitcoin. However, this premium has now collapsed, with the stock’s market capitalization falling below the value of its Bitcoin holdings, a situation traders refer to as a “negative premium”.
Compounding this issue is a serious threat of exclusion from major stock indices like the MSCI USA and the Nasdaq 100. Index provider MSCI is consulting on a new rule that would exclude companies whose digital assets make up more than 50% of their balance sheets, classifying them more like investment funds than operating companies. Analysts at JPMorgan warn that if MSCI and other index providers decide to remove the stock, it could trigger a massive $2.8 billion to $8.8 billion in forced selling by passive funds, creating a major headwind for the share price. The final decision on this critical matter is expected by January 15, 2026.
Financial Engineering and Mounting Obligations
In response to these challenges, the company has pivoted to sophisticated financial engineering. Under Michael Saylor’s leadership, Strategy has launched a series of perpetual preferred shares with high dividends, with names like “Strike” and “Strife”, to raise capital. This move is part of an ambitious plan to build a “Bitcoin yield curve” and attract a new class of yield-seeking investors.
However, this strategy comes with its own set of pressures. The company now faces approximately $700 million in annual payments to cover dividends on these preferred shares and interest on its convertible debt. While the company has stated that Bitcoin only needs to appreciate 1.41% annually to cover its dividend obligations, the recent market downturn is testing this calculus. The falling stock price has also pushed much of its $8 billion in convertible debt out of the money, making it unlikely to be converted to equity and increasing future cash obligations.
A Testament to Bitcoin Conviction
Despite the corporate turmoil, the sheer scale and conviction behind Strategy’s Bitcoin treasury remain undeniable. The company holds an impressive 649,870 BTC, purchased at an average cost of approximately $74,430 per Bitcoin. Even with Bitcoin’s recent pullback to around $86,000, this position remains solidly profitable on paper. Michael Saylor has repeatedly expressed an unwavering commitment to holding Bitcoin, famously stating the company would not sell unless the price fell below $10,000 and that its strategy is built to survive an 80-90% drawdown.
Analysts also suggest that the risk of a forced liquidation of Bitcoin is low in the short term. The company’s debt is largely in the form of convertible notes that don’t mature until 2027 and beyond, giving it breathing room. The core business intelligence unit, while seeing a 3.6% year-over-year revenue decline, continues to generate some cash flow.
The coming weeks will be critical for Strategy. The decision by index providers and the company’s ability to manage its substantial financial obligations will determine whether it can stabilize its corporate structure and allow its monumental Bitcoin bet to continue. I hope this analysis provides a clear picture of the forces at play. Would you like a deeper look into the specific terms of its preferred shares or the technical levels traders are watching for the stock?
