As Strategy (MSTR) stock continues its downward slide, the company’s market capitalization has remained below the value of its Bitcoin holdings for more than seven consecutive months. As of Friday, the company—which has transformed from an enterprise software firm into the world’s largest corporate holder of Bitcoin—has seen its stock price drop more than 80% from the all-time high reached in November 2024. At the same time, mNAV (the ratio of enterprise value to Bitcoin holdings value), long regarded as a core valuation metric, has fallen below 1x, meaning that the total enterprise value, including debt and preferred stock, is now less than the market value of its Bitcoin holdings.
Over the past few years, Strategy’s ability to continuously increase its Bitcoin positions has largely depended on this valuation premium. Investors were willing to assign the company a valuation higher than the value of its Bitcoin assets, enabling it to continuously issue financing instruments such as common stock and perpetual preferred stock to raise funds for ongoing Bitcoin purchases. This created a positive feedback loop of “stock price rise—financing—continued buying—valuation uplift,” which also attracted numerous listed companies to follow suit. However, as mNAV drops below 1x, this financing flywheel has begun to show cracks. Investors are no longer willing to grant a valuation premium, and the company’s financing advantage is rapidly disappearing. If common stock cannot maintain a premium and preferred stock continues to trade at significant discounts, while financing costs keep rising, the company’s ability to raise capital through financial markets for Bitcoin purchases will come into question. The importance of this shift is further underscored by the fact that in recent years, incremental demand for Bitcoin has increasingly relied on institutional investors, including Strategy.
In fact, Strategy had already relaxed its financing terms last August, allowing the company to issue common stock for financing when “deemed beneficial to the company,” and had indicated that after mNAV fell below 1x, it would not rule out using debt to repurchase common stock—though this remains contingent on whether the bond market is willing to continue its support. Meanwhile, the company’s STRC perpetual preferred stock has recently been trading persistently below par value, reflecting growing market concerns over its rising interest and dividend burdens. Paul Howard, Senior Director at Wincent, pointed out that STRC is essentially a high-leverage product, which during periods of market volatility is not only prone to lag behind the stock price but can also act as a catalyst for selling pressure. “When an institution holds an excessively high proportion of Bitcoin, it ceases to be merely an individual stock issue and evolves into a structural risk,” he said.
As of June 21, Strategy held a total of 847,363 Bitcoins. Based on a price of approximately $59,600 at 4:26 p.m. New York time on Friday, the value of its holdings stood at about $50.5 billion, with enterprise value at approximately $50.4 billion, pushing mNAV down to around 1x. The market’s biggest concern at present is that the substantial amount of Bitcoin held by the company does not generate cash flow by itself, and the free cash flow contributed by its software business is also very limited. Data shows that Strategy has roughly $1.4 billion in cash on its books, while cash outflows, including dividends and interest payments expected over the next year, are estimated at about $1.7 billion—meaning cash reserves are no longer sufficient to fully cover related needs, further intensifying market worries about the sustainability of its financing model.
In the face of such criticism, Strategy co-founder and chairman Michael Saylor stated on social media on Friday that the company would continue to firmly execute its established strategy. Strategy did not respond to media requests for comment.
