Strategy Inc. has announced the establishment of a $1.4 billion reserve aimed at securing future dividend and interest payments, addressing investor anxieties about the potential necessity to liquidate parts of its substantial cryptocurrency portfolio if prices decline further. The Virginia-based firm revealed on Monday that this reserve, generated through the sale of shares in its class A common stock, is intended to uphold dividend payments for at least the next 21 months, with a long-term goal of sustaining it to cover up to two years of obligations.
Despite this attempt to stabilize investor sentiment, the announcement did not prevent a notable drop in the company’s share value, which fell as much as 7.9%—the steepest decline in over a year. This downturn comes on the heels of the company’s ongoing strategy of funding its Bitcoin accumulation through stock sales, a decision that has drawn criticism for diluting equity and forcing the firm to consider more expensive funding options.
Currently, Strategy’s modified Net Asset Value (mNAV), a critical valuation metric that juxtaposes the firm’s enterprise value with its Bitcoin holdings, sits at approximately 1.14. This figure has triggered concerns that it could soon become negative. CEO Phong Le articulated last week that should the mNAV dip below 1.0, the firm might be compelled to sell some of its Bitcoin holdings, particularly as Bitcoin prices fell by up to 7% to below $85,000.
In a recent podcast, Le remarked, “We can sell Bitcoin and we would sell Bitcoin if we needed to fund our dividend payments below 1x mNAV,” emphasizing that such a move would be considered a last resort. The company, formerly known as MicroStrategy, has notably shifted its focus from core software development to primarily accumulating Bitcoin.
The recent strategic adjustments come amid increasing instability in the digital asset treasury model, which once thrived on the synergy between cryptocurrency optimism and public market engagement. As Bitcoin prices plummet and investor appetite dwindles, this model appears to be faltering. The previously successful leverage strategy of raising capital to purchase Bitcoin is now undergoing significant strain due to market pressures.
Given that Strategy’s software division does not generate sufficient free cash flow to cover the firm’s dividend and interest commitments—especially since Bitcoin does not yield dividends—the pressure to maintain stability grows. Historically, the company’s aggressive Bitcoin acquisition has been viewed as a positive signal for the cryptocurrency market, while any liquidation of its holdings could reflect negatively.
After a brief pause in its accumulation, Strategy recently announced the purchase of 130 additional Bitcoin for a total cost of $11.7 million, funded through common stock. Le, while discussing the balance between calculated decisions and market perceptions, stated, “There’s the mathematical side of me that says that would be absolutely the right thing to do, and there’s the emotional side of me… that says we don’t really want to be the company that’s selling Bitcoin.” He ultimately concluded that the mathematical rationale tends to prevail.
The decline in Strategy’s share price has eroded the premium that had attracted momentum investors, with the stock now down roughly 65% from its peak in November 2024. As the company’s stock performance draws scrutiny, analysts at JPMorgan Chase & Co. have suggested that Strategy could potentially be removed from significant stock indexes, a development that would trigger substantial outflows from passive investment funds.
In a related update, Strategy adjusted its earnings projections, revising previous forecasts based on an assumption that Bitcoin would reach $150,000 by the end of 2025. Now, these estimates reflect a more conservative price expectation of between $85,000 and $110,000. The revised predictions indicate potential operating income fluctuations ranging from a loss of $7 billion to a profit of $9.5 billion, reflecting the accounting requirement to value Bitcoin holdings at market price at each quarter’s end. The potential net income is projected to range from a loss of $5.5 billion to a profit of $6.3 billion, while diluted earnings per share might vary from a loss of $17 to a profit of $19 per share of common stock.
