Strategy (formerly MicroStrategy) is currently steering the most complex structure in its four-year history as the company’s Bitcoin treasury arm.
The company, which has transformed from a stalwart enterprise software provider to the world’s largest holder of BTC, faces headwinds that threaten the structural dynamics of its valuation.
The Tysons Corner-based company has long operated with the distinct advantage of allowing its shares to trade at a significant premium compared to the net asset value (NAV) of its Bitcoin holdings.
This premium was more than just a sentiment indicator, as it was the driving force behind the company’s capital strategy. This allowed management to raise billions of dollars in equity and convertible debt to acquire Bitcoin, effectively engaging in regulatory arbitrage that would benefit from the lack of spot Bitcoin ETFs in the U.S. market.
However, that valuation cushion is evaporating as Bitcoin has recently fallen to the low $80,000s and MicroStrategy stock has been compressed towards $170.
The stock price is currently trending at roughly the same level as the underlying asset (uniform NAV scenario), fundamentally changing the company’s economic situation.
MSTR leverage breakdown
The collapse of premiums mechanically disables a company’s primary means of value creation.
Since adopting the Bitcoin standard, MicroStrategy has relied on what proponents have described as intelligent leverage and what critics have described as an infinite issuance loop.
The mechanism was simple. As long as the market valued each $1 of MicroStrategy stock at $1.50 or $2, the company could issue new shares to purchase the underlying assets and mathematically increase the Bitcoin per share for existing holders.
This gradual dilution was the basis of Executive Chairman Michael Saylor’s pitch to institutional investors. It effectively turned a stock issuance (usually a negative signal for stockholders) into a bullish catalyst.
The company formalized this metric and introduced BTC yield as a key performance indicator to track increases in capital market activity.
However, this operation does not work in a parity environment. If MicroStrategy trades at 1.0x NAV, issuing shares to buy Bitcoin would be a wash trade with transaction costs and slippage.
There are no structural protrusions. Therefore, if the stock goes to a discount and trades below the value of the Bitcoin stack, the issuance will actively destroy shareholder value.
The burden on the debt side is also increasing.
Strategy Inc. is facing increasing costs of maintaining its massive assets of 649,870 BTC, and its annual debt is now approaching $700 million.
However, the company claims that it still has 71 years of guaranteed dividends left, assuming BTC prices remain flat. It added that the annual dividend obligation will be completely offset if BTC appreciates more than 1.41% annually.
passive flow cliff
While the disappearance of Premium halts the company’s growth engine, an impending decision by MSCI Inc. poses a more immediate structural threat.
Index providers are holding discussions on the classification of digital asset treasury (DAT) companies, with a decision expected after a review period that ends on December 31.
The central issue is taxonomy. MSCI, like other major index providers, maintains strict standards that separate industrial companies from investment vehicles.
If MicroStrategy were to be reclassified as a DAT, it would risk being kicked out of mainstream equity benchmarks and could trigger forced sales of $2.8 billion to $8.8 billion by passive funds.
However, MicroStrategy’s management strongly argued against this classification, arguing that the passive label was a fundamental categorical error.
In a statement to stakeholders, Thaler rejected any comparisons to funds or trusts and emphasized the company’s aggressive financial practices.
According to him:
“Strategy is not a fund, trust, or holding company. We are a publicly traded company with a $500 million software business and a unique financial strategy that uses Bitcoin as productive capital.”
Meanwhile, his defense hinges on whether the company pivots to structured finance.
Thaler points to the company’s active issuance of digital credit securities, particularly the STRK to STRE series, as evidence of active management rather than passive holding.
These five public offerings accounted for more than $7.7 billion in total notional capital this year, according to company data. The company also launched Stretch (STRC), a Bitcoin-backed Treasury credit product that offers variable monthly USD yields.
He pointed out:
“Funds and trusts passively hold assets. Holding companies continue to invest. We create, build, issue, and operate. Our team is building a new kind of company: a Bitcoin-backed structured finance company with the ability to innovate in both capital markets and software. No passive vehicle or holding company can do what we do.”
As a result, markets are now weighing this structured finance story against Bitcoin’s overwhelming presence on balance sheets.
While the software business exists and STRC products reflect true financial innovation, the company’s correlation with Bitcoin remains the main determinant of stock performance.
Therefore, whether MSCI accepts the definition of a digital currency institution will determine whether MicroStrategy can avoid the flow cliff in early 2026.
Will MSTR survive?
The question is not whether MicroStrategy will survive, but how it will be evaluated.
If Bitcoin regains momentum and premiums return, the company could return to its familiar strategy.
However, if the stock remains fixed at NAV and MSCI proceeds with the reclassification, MicroStrategy will enter a new phase. This effectively moves the company from an issuance-driven compounder to a closed-end vehicle that tracks the underlying assets, subject to tighter constraints and lower structural leverage.
For now, the market is pricing in fundamental changes. The “infinite loop” of premium issuance has stalled, leaving the company exposed to the raw mechanisms of market structure.
The coming months will therefore depend on MSCI’s decision and the survival of the parity regime, which will determine whether the model is simply suspended or permanently broken.
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