Disclaimer
This post is intended to be the end-all be-all of explanation about Strategy (MSTR) and its Bitcoin accumulation strategy (about the length of a 14-page double-spaced essay). It is meant to comprehensively explain each aspect of Strategy and counter common misconceptions or straight-up lies. Since you are reading this, I will assume you at least understand the basics of Bitcoin as an asset (blockchain technology, why it's valued, fixed supply, etc). This is not financial advice. The information is up to date as of: 7/22/2025
Table of Contents
- Core Thesis
- Common Stock ATM - (MSTR)
- Convertible Bonds
- Preferred Shares
- Corporate Structure
- Risk Management
- Simple Example of Yield
- Conclusion
1. Core Thesis
Strategy’s Bitcoin strategy is built on a simple thesis: Bitcoin is the superior long-term store of value in a world of fiat currency debasement. Instead of sitting on a depreciating dollar balance sheet or buying underperforming bonds, Strategy has chosen to convert its cash and future cash flows into a Bitcoin treasury. Their long-term goal is to utilize a flywheel financial strategy to continually add Bitcoin on their balance sheet using a variety of capital raising techniques.
Their primary mission is to provide the common stockholder with long-term (5 years+) value and out performance of Bitcoin. This mission is accomplished through the delivery of Bitcoin Yield - a proprietary key performance metric that measures the rate at which Strategy increases its Bitcoin holdings per share. In other words, the company will not just hold Bitcoin, but deliver more Bitcoin per share to investors than they could obtain by holding spot BTC themselves.
I will now describe the various ways that Strategy raises capital in-depth to provide yield.
2. Common Stock - (MSTR)
Raising capital through the sale of company equity (partial ownership) is their primary and most simple way to acquire money for their bitcoin buys. In all likelihood, you are on this subreddit because you are a common stockholder of Strategy. This means that you own equity in the company and are the direct recipient of the effects of Bitcoin Yield. A key tool in the strategy is the At-The-Market (ATM) offering program, which allows Strategy to raise capital efficiently through equity issuance. The ATM allows Strategy to issue common stock directly into the open market at the current price through a designated broker.
In classical finance, when investors hear that their company is selling stock, they immediately get scared of dilution. When more shares are cutting up the pie that is market cap, each slice will be smaller after the completion of the sale. Strategy is different in this regard as their sales of stock are accretive to the shareholders. MSTR trades at a premium to the holdings of their Bitcoin, which is most directly represented by the mNAV (Market Net Asset Value). So when they trade at a 2x Mnav, that means the market is willing to pay twice the market rate on their held Bitcoin. I will explain why this premium is justified in section 7.
Historical mNAV premium
When they sell stock, they can capture this premium and convert it directly to hard assets on the balance sheet. This is a simple arbitrage that allows Strategy to add more Bitcoin to their balance sheet than shares that get issued. Here is a simple example using numbers as I write this:
MSTR is trading at a 1.82× premium. Then:
BTC per share = $422 ÷ 1.82 ≈ $232
When they sell a share of MSTR that represents a $190 accretion of Bitcoin through the captured premium.
It is important to note that MSTR is the lowest offering in the capital structure of Strategy. That means if they were forced to liquidate or go bankrupt, bond and preferred holders would get paid out before common stockholders. MSTR is designed to be the most volatile and fastest-growing offering that Strategy has. It is meant to be the fastest racehorse among all equities on the wider market. Its large historical IV (implied volatility) raises the premiums for options contracts, which allows its options market to be many times larger than stocks of similar market cap.
Comparison of volatility
MSTR has the most risk, but will also benefit the most through explosive growth as the strategy is executed. This is what to hold to gain BTC per share over time.
3. Convertible Bonds
We are now entering the section where we cover debt and leverage. Strategy uses intelligent leverage to safely juice the balance sheet through borrowing fiat currency. In this regard, they are essentially shorting fiat by borrowing it to buy Bitcoin. Such a prospect is inticing considering the large US government deficit and the necessity for them to continually print money. Fully explaining fiscal dominance would require another 5 pages of macroeconomics, so I will leave it to you to research that.
Convertible bonds are hybrid financial instruments that combine features of debt and equity. They are issued as bonds, meaning the issuer (Strategy) borrows money from investors and promises to repay the principal at maturity. The issuer is often required to pay periodic interest payments (coupons). However, convertible bonds include an option for bondholders to convert their bonds into a predetermined number of the issuer’s common stock when certain conditions are met. These bonds are meant to provide the holder with downside protection through the repayment of principal and the ability to participate in much of the upside from common stock. The convertible bond market is quite small, and in 2025, Strategy accounted for 30% of its entirety in the US.
Understanding the exact terms of these convertible bonds is vital to understanding the risk management of Strategy and how they are a good deal for the company.
An overview of current convertible bonds
This is a lot of numbers, but it's not too complicated to understand. The important thing to note is at what price the bonds (debt) will convert into common stock and when these bonds will reach maturity (forced principal repayment if not converted). These bonds have their maturity spread from 2028 to 2032, so the entire $8 billion obligation will not come due at the same time. You may have already noticed that the common stock is currently trading above the conversion price for a majority of these bonds. Each bond has different terms, but at a certain agreed-upon date, Strategy can force conversion into shares as it pleases.
So why are these bonds considered a good deal? Firstly, they are unsecured, which means the principal is not required to be paid in Bitcoin and there is no liquidation price or margin call. So Bitcoin can trade at $1, and the bondholders cannot force Strategy to sell their Bitcoin to ensure payment of principal. Secondly, that ability for Strategy to forgo principal repayment through the conversion mechanism allowed them to take on very cheap debt (low coupon payments) and essentially perform a superior common stock ATM. In the same way that the common stock ATM works, they can buy more Bitcoin than shares they will be forced to issue. The convertible bonds are more accretive because when they convert to shares, they have already bought Bitcoin a while ago when it was at a much lower price.
These bonds are on the way out, as Strategy has stated in their most recent presentation. While they do represent a good deal, they are not as flexible as preferred shares (Section 4). Bond issuance is a tedious process, and they likely want to simplify their debt structure moving forward. They expect that all of these bonds will be converted to stock by 2029. The only way I see them issuing convertible bonds again is for a negative coupon (the bond holder has to pay Strategy). At first glance, this sounds insane, but the institutions that purchase these bonds often perform convertible bond arbitrage, which is a complicated actively managed hedging strategy that involves staying delta neutral through shorting the common stock. That means that these institutions can still guarantee a return on investment even while paying for the privilege of holding the bonds. Convertible bond arbitrage is a complicated topic, and I do not have the space to include it in this post.
4. Preferred Shares
Preferred shares (or preferred stock) are a class of equity securities that combine features of both stocks and bonds. Unlike common stock (MSTR), preferred shares do not have voting rights, do not have residual ownership in the company, and are superior in the capital structure. Preferred shares are how Strategy intends to target the credit markets, with each one providing the holder a different exposure to the yield curve. Each one currently has, or soon will have, their own ATM offering. All of these are perpetual which means there is no maturity date or repayment of principal (but their dividend will have to be paid forever unless certain conditions are met). I will now describe each preferred share and its terms.
This helps provide context for how each preferred share meets the demands of different credit investors
STRK- Strike is what they call "structured Bitcoin". It pays an 8.00% cumulative fixed dividend per annum on a $100 liquidation preference (each share pays out $100 in the event of liquidation), equating to $8 per share annually ($2 per share quarterly). These dividends are payable in cash, Class A common stock (MSTR), or a combination. This preferred is cumulative, which means that if they miss a payment period, the unpaid dividends will accumulate and have to be paid later.
Holders can convert STRK into Class A common stock (MSTR) on any business day in the last month of each quarter (March, June, September, December) at an initial conversion rate of 0.1000 MSTR shares per STRK share. If STRK trades at $100 per share, its economic conversion price is $1,000 per MSTR share. So basically, if MSTR is trading at more than 10x of STRK, you can capture a gain when converting. The convertibility allows these shares to be taken off the balance sheet as the price of MSTR increases. Again, this is advantageous to Strategy as they can buy Bitcoin now with cheap debt and convert it to shares later once Bitcoin has appreciated. STRK allows investors to capture the upside of Bitcoin price movements while also taking home a nice dividend (hedge funds, risk-adverse growth investors, etc).
STRF- Strife is the "crown jewel" of Strategy, which will sit at the very top of the capital structure (once the convertible bonds have been converted). This preferred share is meant to act as a long-term bond that is the safest and most senior yield provided by Strategy. It essentially acts as the main rival to the 30-year US treasury bond. It pays a 10.00% cumulative fixed dividend per annum on a $100 stated amount (liquidation preference), equating to $10 per share annually. If dividends are unpaid, dividends compound at 10% plus an additional 1% per annum, escalating up to 18% until settled. STRF is not convertible, which makes it a pure income play. This appeals to risk-averse investors seeking high yields without the volatility of MSTR (Pension funds, insurance companies, etc).
STRD- Stride is the true junk bond of the group. It is lowest in the capital structure among the preferreds and offers the highest dividend yield. It has the same terms of STRF (10% dividend for $100 liquidation preference), but with some very key differences. Stride is non-cumulative, which means that if a dividend is payment is missed, Strategy has no obligation to accrue the dividends for later payment. This adds risk to STRD, which justifies its higher dividend yield. STRD is also not convertible to common stock. STRD is meant to appeal to high-conviction investors that are willing to take on more risk to achieve higher dividend payments.
STRC- Stretch is the high-yield savings account / yield-paying stable coin of Strategy. Stretch pays a cumulative, variable dividend rate starting at 9.00% per annum on a $100 stated amount (liquidation preference), equating to $9 per share annually (~$0.75 monthly). This is the only share so far that offers monthly payments as opposed to quarterly. The dividend rate adjusts monthly based on the one-month term Secured Overnight Financing Rate (SOFR), with strict limits preventing reductions greater than 0.25% per month. Unpaid dividends accrue with interest, compounding monthly until paid. Stretch is designed to trade as close and as stable as possible to its liquidation preference. STRC targets short-dated credit and acts as a superior (higher yield and backed by Bitcoin) money market fund. As I am writing this, the IPO has not yet been released. STRC is callable (Strategy can buy holders out) for $101 per share plus accumulated, unpaid dividends (including interest), or the greater of $101 or the average of the last five trading days’ sale prices for tax-event redemptions.
This is how they intended to keep STRC trading at par
These 4 preferred shares are the primary way Strategy intends to leverage the balance sheet for the foreseeable future. The use of the ATM allows Strategy to dynamically issue these shares to meet the needs of the credit market as they arise. The general idea is to issue these shares to buy Bitcoin with the raised capital. As Bitcoin appreciates more than the dividend obligations on a yearly basis, Strategy will capture an accretive gain on its Bitcoin holdings. Again, it goes back to: acquire more Bitcoin than you have to issue shares to cover obligations. So far, each of these preferred shares has traded upwards in the open market, which has lowered their effective yield. The market is willing to pay more money to get a smaller dividend % as shown in the graph below. The higher premium on the shares, the more money Strategy can raise while paying out a lower yield.
This graph shows the effective yield of the preferred shares over time
5. Corporate Structure
Governance is led by a five-person board, with Michael Saylor, the CEO and Chairman, as the figurehead. As of February 2025, Saylor’s voting power is at ~46.8% from his stock holdings (as more shares are issued he will continue to lose voting power). The other directors, like President Phong Le and three other independent board members, ensure compliance with the SEC. The management team, including Le and CFO Andrew Kang, is paid in stock options so they are aligned with the interests of the common shareholder. The SEC requires that Strategy maintains independent boards to oversee audit compensation and nominations for top-level positions. They are also audited independently by KPMG. Due to its regulatory environment of oversight by the government, Strategy does not view public proof of Bitcoin reserves as necessary (and can even pose risks due to targeted hacking). Also consider that Gary Gensler (the most anti-crypto SEC chair ever) presided when Strategy was performing their bitcoin operations. That is to say: yes, they have the coins!
Each offering of Strategy is positioned in a specific location among the capital structure. The convertible bonds are at the very top, but the others are positioned as follows:
Overview of all current offerings by seniority
6. Risk Management
Bitcoin is a volatile asset, and no one can say for sure that it will still be around far in the future from now,. At the end of the day, Strategy and its treasury always has the ability to crash to $0. What I mean to say is that the risk of Bitcoin will translate to the risk of holding Strategy (this should be obvious, but I'm covering my bases). You must determine for yourself if you believe Bitcoin has a large or low amount of long-term risk.
So now that we have established Bitcoin risk, we must examine the additional risk of holding Strategy over spot Bitcoin. It is important to note that MSTR does not trade as a 1 to 1 leveraged proxy of Bitcoin. So if you are trading Strategy in the short-term, do not expect perfect correlation. Strategy has time and time again stated that their goal is to provide value for long-term holders (5+ years minimum), so your call options are not a priority for them.
In the longer term, the main risk is leverage. As has been explained previously, their debt obligations are not callable and in the case of the bonds have several years to be converted before maturity is reached. Strategy is not some teenager playing with margin on Robinhood. They have quite a few employees who have done quite a bit of work to ensure that their credit risk is managed. They have ensured, for the past 5 years, that even during the worst crypto bear market in history. Bitcoin would need to have an 80%+ crash and would need to stay at such reduced levels for more than 3 years before Strategy would become financially strained to the point where a sale of Bitcoin would be forced. Anyone who is highly knowledgeable in the Bitcoin market would know that at this current time, such a depression would be extremely unlikely to take place.
The other primary risk would be that for yield to continually be provided to shareholders, a constant influx of new capital is required. This is where you get the common critique of: MSTR is a Ponzi scheme. This statement is blatantly false for two reasons. Firstly, the definition of the scheme requires that there is no real asset, promises of safe returns (Saylor admits that if Bitcoin dies, so do they), and intensive fraud (MSTR is very public and has heavy oversight as previously discussed). Secondly, if you are unaware, the equity and credit markets are very large (over $300 trillion combined). So that means that there is a very large pool of capital that has yet to enter Strategy or Bitcoin.
So how can we be confident that Strategy will be able to draw in this large amount of capital? On the equity side, we have indexes. So when a person goes to buy QQQ (NASDAQ ETF), for example, each dollar of that ETF is split amongst all the holdings held within the index. The larger the market cap of the company, the larger share of that dollar is sent to it. This means that MSTR can get more and more passive inflows from the wider equity market as its capitalization grows. Recently, MSTR has qualified to enter the S&P 500, which is the largest and most popular of all indexes. We are entering a world in which, as your grandparents or coworkers put money into their 401k or market ETFs, Strategy will obtain an ever-growing passive inflow of capital. On the credit side, people simply want a safe way to make income. The higher yield of Strategy offerings makes their preferred shares extremely competitive compared to other options such as treasury bonds. All in all, Strategy has a solid foundation for continuing to capture capital for its Bitcoin treasury.
To summarize: Strategy has a risk-managed path to capturing a massive amount of capital for the foreseeable future. You might ask: Well, what if more money does run out? Once we reach that point, several decades from now, we will be in an entirely different world. Strategy could act as the largest Bitcoin bank in the world at this point, but we can only speculate as of now.
Note: As long as Bitcoin has a long-term CAGR of above approximately 10% they will be able to cover their debt obligations through the issuance of common stock without diluting the shareholders of Bitcoin. Historical CAGR has never been below 15% annualized over any period greater than 3 years (even in the depths of the crypto winter).
This illustrates how equity issuance can cover current yearly obligations
7. Simple Example of Conservative Yield
You're buying one share of MicroStrategy for $422. That share gives you exposure to about $230.60 worth of Bitcoin (At 1.83 mNAV). This means you're paying a premium of $191.40 just to get Bitcoin exposure through MSTR instead of buying Bitcoin directly.
Now assume Strategy achieves a 10% yield every year — meaning the Bitcoin held by MSTR grows steadily by 10% annually (10% is far lower than any year so far). We're not assuming Bitcoin's price goes up, just that the company keeps increasing its Bitcoin per share at a 10% rate. Each year, the Bitcoin portion of your MSTR share (currently worth $230.60) grows by $23.06.
At that rate, it will take about 8.3 years for the Bitcoin yield alone to make up for the $191.40 premium you paid. Then after this point you will have more Bitcoin per share than if you had just held spot Bitcoin in the first place.
Here is a basic formula to calculate when you break even in Bitcoin terms
8. Conclusion
Strategy is truly a pioneer of novel corporate finance. We have never before seen a hard asset like Bitcoin, so it makes perfect sense that we are going to see some new financial wizardry. Strategy is a black hole that sucks in more and more capital and deposits it into Bitcoin so it can continue to grow larger in capitalization which allows for further capital raising. They have positioned themselves as the apex predator of Bitcoin accumulation since they hold the biggest stack, lowest cost basis, and most collateral to capture the massive credit market. Each security they issue just makes their other securities more attractive in the market (more collateral for preferreds or more yield for common stock), so that means they can keep their financial flywheel spinning. Now you have an advantage because you have an understanding of how they intend to dominate the future. This was a very long explanation that 99.9% of the population does not understand (you must know Bitcoin and corporate finance, which is not very common, as I have seen). I hope this has helped you to make more informed decisions and how you view my favorite company.
In Short: If Bitcoin wins, Strategy wins HARDER
MSTR winning
Sources
https://www.strategy.com/
http://www.youtube.com/@strategysoftware
https://strategytracker.com/mstr?charts=performance-comparison%2Cbitcoin-price%2Cperformance-nav-premium&timeRange=all
