Jeff

Standard

A Wall Street veteran is sounding the alarm on Strategy Inc., warning that the company's aggressive Bitcoin financing model has reached a breaking point and that someone is about to get hurt.
<a href="https://www.thestreet.com/crypto/markets/why-bitcoins-price-is-falling-despite-strong-macro-conditions" rel="noopener noreferrer nofollow">Jeff Dorman</a>, chief investment officer of digital asset manager Arca, published a <a href="https://x.com/jdorman81/status/2060063924582830127" rel="noopener noreferrer nofollow">detailed breakdown on X</a> on Thursday arguing that Strategy's capital structure has "gotten so out of hand" that a major loss for one group of stakeholders is now inevitable within four months.
<a href="https://www.thestreet.com/crypto/markets/michael-saylor-moves-30-million-in-bitcoin" rel="noopener noreferrer nofollow">Related: Michael Saylor moves $30 million in Bitcoin</a>
<h2 id="math-that-only-works-if-bitcoin-goes-up">Math that only works if Bitcoin goes up</h2>
Strategy, formerly known as MicroStrategy, has <a href="https://www.strategy.com/press/strategy-completes-1-5-billion-debt-repurchase-and-achieves-btc-yield-of-13-3-ytd-now-holds-843738-btc_05-26-2026" rel="noopener noreferrer nofollow">accumulated roughly $15 billion</a> in preferred stock that carries approximately <a href="https://www.thestreet.com/crypto/markets/michael-saylor-buys-back-1-5b-worth-debt" rel="noopener noreferrer nofollow">$1.5 billion in annual dividend obligations</a>.&nbsp;
Dorman's argument is that this structure was built on a single assumption, that <a href="https://www.thestreet.com/crypto/markets/morgan-stanley-discloses-bitcoin-xrp-sol-holdings" rel="noopener noreferrer nofollow">Bitcoin</a> would keep rising, allowing the company to fund those dividends through future Bitcoin sales.
That bet has not paid off. Bitcoin has been under pressure, currently trading close to $73,400, and Strategy's cash position has shrunk significantly.
The company recently raised $2 billion through stock issuance, which Dorman called a "smart move", enough to cover roughly two years of dividend payments. But instead of holding that cash as a buffer, <a href="https://www.thestreet.com/crypto/markets/analyst-predicts-140-upside-for-microstrategy-stock" rel="noopener noreferrer nofollow">Strategy</a> used $1.38 billion of it to repurchase its own zero-coupon convertible notes due in 2029, buying them back at an 8% discount.&nbsp;
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That reduced the 2029 bond stack from around $8.2 billion to $6.7 billion but left the company with only about $871 million in cash, a figure Strategy's <a href="https://www.strategy.com/press/strategy-completes-1-5-billion-debt-repurchase-and-achieves-btc-yield-of-13-3-ytd-now-holds-843738-btc_05-26-2026" rel="noopener noreferrer nofollow">own filings confirm</a>.
<blockquote>
 "This is a baffling decision for a company with cash flow problems," Dorman wrote. "Why pay off 0% coupon debt with the only cash you have?"
</blockquote>
<h2 id="saylor-s-options-are-running-out">Saylor's options are running out</h2>
Dorman sees only a few paths forward.&nbsp;
Strategy could sell Bitcoin to fund dividends but doing so during a Bitcoin downturn would pressure both <a href="https://www.thestreet.com/crypto/markets/cathie-wood-sends-strong-prediction-on-bitcoin-despite-massive-outflows" rel="noopener noreferrer nofollow">BTC's price</a> and MSTR's stock simultaneously. It could issue more preferred stock, dilute common shareholders further, or pay dividends in shares rather than cash.
<a href="https://www.thestreet.com/crypto/tag/michael-saylor" rel="noopener noreferrer nofollow">Michael Saylor</a> has publicly ruled out new convertible notes, which would have been the most logical way to extend the runway.&nbsp;That leaves the options narrower.
<blockquote>
 "The only bull case," Dorman wrote, "is that underestimating Saylor's capital markets chicanery has been a losing proposition for years. Maybe there was a plan?"
</blockquote>
His conclusion was blunt:&nbsp;
<blockquote>
 "This is the first time that MSTR, BTC and Pref holders are really in a bind. Someone is going to lose badly here, and it will happen in the next 4 months."
</blockquote>
<a href="https://www.thestreet.com/crypto/markets/billionaire-hedge-fund-manager-dumps-microstrategy-stock-entirely" rel="noopener noreferrer nofollow">Related: Billionaire hedge fund manager dumps MicroStrategy stock entirely</a>

Wall Street veteran issues stark warning on MicroStrategy's business

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