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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
First, let’s give Michael Saylor his due. His pivot from enterprise software program to bitcoin bingeing represents one of the worthwhile capital markets selections of all time.
Since August 2020, (Micro)Technique’s inventory has surged by 25 occasions, whereas bitcoin has climbed “solely” tenfold. Not unhealthy for a man who misplaced his fortune and nearly his company within the dotcom period with an accounting restatement, a 99 per cent share price collapse, and SEC fraud charges (settled for thousands and thousands of {dollars}, with no admission of wrongdoing).
But it surely feels just like the magic is fading.
Recall that again in November, FT Alphaville wrote in regards to the firm’s voracious urge for food for recent capital. Since our first publish, the inventory has fallen from round $357 to $351 at yesterday’s shut, with wild gyrations alongside the best way, together with a peak of $543 on 21 November. But throughout that point, bitcoin has rallied by 25 per cent, taking it from $88,000 to round $111,000.
In fact, totally different time durations will yield totally different outcomes. For the year-to-date, Technique and bitcoin have carried out in line; nevertheless, during the last month, Technique’s underperformance has been fairly stark:
The irony is putting. For the corporate has kept HODLing and buying, including 353,000 bitcoin on this interval and reinforcing its standing as the biggest company holder of bitcoin — with 3 per cent of complete provide. Nevertheless, over the previous 9 months, proudly owning the company automobile designed to leverage that wager has been worse than proudly owning the underlying asset.
The beforehand profitable treasury strategy appears now to be stopping stockholders from absolutely collaborating within the very bitcoin rally they are funding. The truth is, the rush of stock sales by Strategy insiders in November 2024 seems to have been well-timed.
And you’ll’t blame unhealthy luck for Technique’s soggy efficiency; nearly all the things has labored within the firm’s favour. Technique has joined the Nasdaq 100 index, accounting changes has turned its unrealised positive factors into GAAP earnings (which could lead to inclusion in the S&P 500), and the Trump Administration has been rolling out the red carpet for digital property. But Technique’s inventory can’t fairly get out of its personal approach.
The devoted are displaying early indicators of restlessness. For the primary time in years, a section of Saylor’s loyal on-line base is questioning him as a result of the corporate diluted (pun supposed) previous guidance about new stock sales. In late July, Technique pledged to not promote inventory when its market worth fell beneath 2.5 occasions its bitcoin holdings (so-called “mNAV”, which stands for market-to-net asset worth).
That promise lasted about two weeks earlier than administration determined it wanted “greater flexibility”. Now the company can issue stock at far lower levels. Some critics felt betrayed, as a result of it seemed like Saylor was winging it relatively than executing a disciplined plan.
(Revised guidance on 18 August 2025)
Truly, the shift is a concession to actuality greater than anything. As Technique’s most recent 8-K reveals, final week’s $357mn bitcoin buy was funded principally by promoting frequent inventory, with two of the 4 flavours of perpetual most well-liked inventory devices masking the remainder.
The preferreds pay excessive dividend coupons, and the legacy software program enterprise doesn’t even come near producing the money to pay them. Technique due to this fact will get trapped in a recursive loop: it should subject new securities — whether or not frequent inventory or different preferreds — to service the dividends on the outdated securities it issued to purchase bitcoin (zoomable version).
From that angle, Saylor’s coverage tweak makes pragmatic sense. There’s no level in abiding by an arbitrary 2.5x mNAV threshold when your inventory trades at a a lot decrease premium (Strategy’s stock is currently at 1.6x mNAV).
Issuing shares above internet asset worth is in impact printing cash: each greenback raised buys greater than a greenback’s value of bitcoin, lifting bitcoin per share. So the additional flexibility from the revised steering frees Technique from an pointless straitjacket.
But there’s a actual value. Every inventory sale chips away at present holders’ declare on the bitcoin stash. The premium over NAV is what makes Technique’s technique work, and it’s step by step eroding. The query now’s whether or not Saylor’s relentless salesmanship can preserve that premium alive.
If the premium vanishes totally, the mannequin dangers breaking. Issuing inventory at or beneath NAV can be dilutive and self-defeating.
To be clear, the corporate faces no near-term existential risk. There aren’t any margin calls, and the corporate has deftly termed out its debt. The primary huge take a look at isn’t till September 2027 when buyers have the correct to drive the corporate to repurchase $1bn of convertible bonds.
But it surely doesn’t have infinite time, both. Some $5bn of Strategy’s $8bn of convertible bonds are currently out-of-the-money, and if the inventory doesn’t rise, these bonds gained’t convert into fairness. Which means Technique will need actual cash to repay the principal. Inventory appreciation is a necessity for the mannequin to work.
Seen this manner, the uproar over the brand new issuance steering misses the purpose. Fairness gross sales are a symptom of a construction that should frequently promote itself to outlive. The system depends on two beliefs (or suspensions of disbelief, if you’ll): that bitcoin will at all times go up, and that buyers will at all times pay a premium for Saylor’s model of it.
The (Micro)Technique saga stays one of the extraordinary tales ever within the capital markets. However the story is displaying indicators of decay because the inventory loses momentum regardless of bitcoin’s sturdy efficiency.
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