Strategy's Bitcoin Sale Marks Silent Shift to Financing Model

Over the past 18 months, Strategy has moved away from its original model of issuing common equity at a premium to its Bitcoin holdings. Instead, it has increasingly relied on preferred stock issuance, particularly the STRC series, to finance further accumulation. This change has transformed Strategy from a Bitcoin proxy trading at a premium into a more complex financing vehicle with explicit funding costs and layered capital claims.

From premium proxy to financing structure

Between 2020 and late 2024, Strategy’s model was relatively straightforward. The company issued common equity when its market capitalization exceeded the value of its Bitcoin holdings – a metric known as mNAV (Market-to-Net Asset Value). The proceeds were used to buy more Bitcoin, increasing Bitcoin per share and supporting a higher valuation. This created a self-reinforcing cycle, often described as a flywheel.

At its peak in November 2024, Strategy’s mNAV reached 3.29 times. This premium was supported by three main factors: the convenience of gaining Bitcoin exposure through a listed stock without managing custody, the leverage provided by convertible debt and Michael Saylor’s public commitment never to sell Bitcoin.

That premium has since collapsed. By early June 2026, mNAV had fallen to 0.86 times – a decline of roughly 74% from its peak. Several factors contributed to this compression. The launch of spot Bitcoin ETFs gave institutional investors a simpler way to gain exposure without taking on corporate-level risks. At the same time, a growing number of other public companies have adopted similar Bitcoin treasury strategies, reducing Strategy’s uniqueness as a listed proxy. Bitcoin itself also became more institutionalized, which reduced the additional premium investors were willing to pay for a leveraged corporate wrapper.

The traditional mNAV-equals-1 rule no longer functions as a reliable guide for when equity issuance is accretive. Because Strategy now has significant senior claims from preferred stock and convertible debt, common equity issuance only becomes accretive once the company’s enterprise value exceeds its Bitcoin holdings by a meaningful margin – currently estimated at 1.2 times on an enterprise mNAV basis. Strategy itself acknowledged this higher threshold in its first quarter 2026 disclosures.

As of early June 2026, Strategy’s enterprise mNAV stood at approximately 1.23 times, just above the accretion threshold. However, it has dipped below this level multiple times in recent months. This explains why the company has largely avoided common equity issuance for the past seven months.

Rise of the preferred stack

Despite the reduced use of common equity, Strategy has continued to expand its Bitcoin holdings aggressively. Between the end of 2024 and early June 2026, its Bitcoin treasury grew from 446,400 BTC to 843,706 BTC. This increase was financed almost entirely through preferred stock issuance.

By early June 2026, Strategy’s preferred stock stack had reached a total liquidation preference of $15.5bn. The STRC series alone accounted for $10.5bn of this amount, with the remaining series making up roughly $4bn to $5bn. Growth has been heavily concentrated in STRC, which increased by $5.5bn in notional value over just nine weeks in the second quarter of 2026.

Strategy’s preferred instruments behave differently from conventional preferred stock. Traditional preferred securities tend to correlate more strongly with broader preferred indices and less with the issuer’s common equity. Strategy’s preferred stock shows the opposite pattern. STRC, for example, has shown a correlation of +0.70 with MSTR common stock and +0.64 with Bitcoin, but only +0.29 with the S&P 500 Preferred Stock Index.

This suggests that buyers of Strategy’s preferred stock are not traditional income-focused investors such as insurance companies or pension funds. Instead, they appear to be equity or crypto-oriented investors seeking leveraged exposure to Bitcoin with a yield component. This has important implications. Because these holders are sensitive to Bitcoin and equity price movements, Strategy’s preferred stock is unlikely to provide the stable senior buffer that its legal structure would suggest during periods of market stress.

The market is also pricing the corresponding series differently. STRC trades with relatively strong support near par value, partly because of its variable dividend mechanism designed to defend its price. Other series, particularly the more subordinated STRD, trade at significantly wider yields, reflecting the market’s assessment of their relative risk.

It is essential to note that preferred dividends are not a hard contractual obligation in the same way as bond interest. According to the prospectuses, dividends are payable only when, as, and if declared by the board. Strategy can defer payments without triggering a default, although doing so would likely damage investor confidence and increase the cost of future capital raises.

Six layers of defence – and their limitations

Strategy has outlined six potential ways to service its growing preferred dividend burden, which reached an annual run rate of $1.71bn as of early June 2026.

The first layer is its USD cash reserves, currently around $900mn. The second is the continued issuance of convertible debt, although this has become more expensive as mNAV has declined. The third is common equity issuance above the 1.2 times enterprise mNAV threshold. The fourth is further preferred stock issuance, which remains active but at a rising marginal cost. The fifth is Bitcoin sales. The sixth is the deferral of preferred dividends.

While this framework provides flexibility, several of these layers carry meaningful costs if used. Large-scale Bitcoin sales would contradict Strategy’s long-standing narrative and could trigger negative market reactions. Dividend deferral, while legally permitted, would likely be interpreted as a signal of stress and could materially increase Strategy’s future funding costs. The model therefore retains optionality, but exercising some of these options would itself create new pressures on the capital structure.

Refinancing wall ahead

A more immediate structural challenge lies in Strategy’s convertible debt. As of late May, the company had $6.71bn in outstanding convertibles. Of this amount, $4.51bn has put dates concentrated between September 2027 and June 2028. These instruments have conversion prices ranging from $183 to $672, well above the current share price of around $137.

Short of a substantial recovery in the stock price, Strategy will likely face significant cash outflows to retire or refinance these instruments. This creates a clear refinancing window in 2027 and 2028 during which the company will need to demonstrate continued access to capital markets at acceptable costs.

Bitcoin sale as a precedent

The sale of 32 BTC at the end of May was relatively small but symbolically significant. It marks the first time Strategy has sold Bitcoin since adopting its treasury strategy. While the transaction itself does not materially change Strategy’s financial position, it establishes that Bitcoin can now be used as a source of liquidity within the current financing model, alongside preferred issuance and convertible debt.

This represents a quiet but important shift in how the company manages its balance sheet. Bitcoin is no longer treated solely as a long-term holding, but as a potential liquidity tool when other funding sources become constrained or expensive.

Conclusion

Strategy has undergone a fundamental change in its operating model. It has moved from a relatively simple equity-funded Bitcoin accumulation strategy to a more complex financing structure that relies heavily on preferred stock, carries explicit funding costs, and maintains multiple layers of defence to service those costs.

This new model provides greater flexibility in the short term. However, it also introduces new risks. The cost of capital is now visible and rising. The preferred investor base appears more sensitive to Bitcoin price movements than traditional preferred holders would be. And the company faces a significant refinancing wall in 2027 and 2028.

The sustainability of the model will depend on several factors: the continued ability to issue preferred stock at acceptable costs, the trajectory of Bitcoin prices, and Strategy’s willingness and ability to use Bitcoin sales or dividend deferral if needed without triggering a loss of market confidence. While the structure currently remains functional, the increasing reliance on preferred financing and the compression of traditional valuation metrics suggest that Strategy is operating with less margin for error than it had during its earlier premium-driven phase.