Strategy Under Pressure: STRC Falls Below $85 as Bitcoin Financing Risks Grow

The preferred stock STRC of Bitcoin-treasury company Strategy came under significant pressure today and temporarily fell below 85 dollars. The sell-off has intensified market concerns that the complex financing structure around Bitcoin and preferred instruments is coming under increasing stress. MSTR also dropped by more than 5% today as part of the same move.

The focus is not so much on a single event, but rather on the ongoing uncertainty about the sustainability of the structure. While Strategy’s stock remains heavily dependent on Bitcoin price dynamics, the company’s various financing instruments are also coming under pressure as investors price higher risks into the capital structure.

Scenario analysis for Strategy

Jeff Dorman, Chief Investment Officer at Arca, sees the situation as particularly critical and outlines three possible scenarios.

With a probability of 70%, Dorman expects the company to continue as before and sell small amounts of MSTR every month. In his view, this would continue to weigh on the stock until it falls to around 0.70 mNAV. For STRC holders, this would leave at least a small glimmer of hope, while Bitcoin itself would hardly be affected. MSTR, however, would likely come under significant pressure.

With a probability of 25%, Dorman considers it possible that Michael Saylor admits the mistake in the debt buyback, sells 3–4 billion dollars worth of BTC, and thereby buys the company much more time. This would be slightly positive for MSTR, positive for STRC, and negative for Bitcoin in the short term, but rather stabilizing in the long term.

As a third scenario, Dorman sees the “nuclear option” with a probability of 5%. Strategy could stop dividend payments and accept that the preferred shares fall to 30–40 cents on the dollar. This would largely cut the company off from access to capital markets, but at the same time it would end the problem of annual cash outflows of 1.7 billion dollars and give Bitcoin several years to recover.

At the same time, Dorman points out that, according to his calculations, Strategy is still trading above an mNAV of around 1.15 and therefore theoretically above what he considers fair value. If the current dynamics continue, he believes further declines in both STRC and the common stock are likely.

Conclusion:
Strategy is facing growing pressure as its complex financing structure remains closely tied to Bitcoin price dynamics. Continued small MSTR sales could keep the stock under pressure, while selling part of the BTC holdings or halting dividends would represent more radical stabilization scenarios.