US tech company Strategy (, previously MicroStrategy ), has become a market focus due to its repeated large-scale purchases of Bitcoin. However, venture capital partner Adams Cochran warned that the company is facing serious financial risks due to its high-leverage betting strategy, especially with its latest issuance of 10% perpetual preferred stock, which has been described as a "desperate gamble."
Financial pressure intensifies: negative cash flow and leverage risk
Cochran pointed out that the operating cash flow (Operating Cash Flow) for Strategy had a net outflow of 53 million USD in 2024, while the levered free cash flow (Levered Free Cash Flow) reached a negative 1.06 billion USD. At the same time, the company plans to issue 500 million USD of Series A perpetual preferred stock, paying a 10% dividend annually.
(Strategy announced a $500 million preferred stock issuance plan, intending to use part of the funds to purchase Bitcoin ).
As an important indicator of financial analysis, leveraged free cash flow reflects a company's cash flow and generation capacity after considering its debt burden. In this regard, he questions whether this move is really to raise funds to support its Bitcoin strategy, or if it is to cope with the upcoming maturity of convertible bonds?
Cochran analysis indicates that the Strategy issued $650 million convertible bonds in December 2020, which will mature in December 2025, and they have recently been converted into equity at $39.80 per share, far below the current market value:
This means that the Strategy purchased Bitcoin at a price of $10,000 in 2020, paying up to $4.6 billion in equity value ( based on the current stock price estimation ), with costs magnified over 7 times. Even if Bitcoin subsequently rises to $80,000, the final return on that investment may still be close to zero.
However, some users rebutted this claim, pointing out that this batch of debt has actually brought significant profits to Strategy. For example, this fund purchased a total of 29,646 Bitcoins, which now has a market value of 2.417 billion USD, an increase of 1.57 billion USD compared to the purchase cost, indicating that this investment is not a complete failure.
However, this move still highlights the risks and concerns behind the high leverage strategy of Strategy.
( Bitcoin and MicroStrategy Strategy: The new darling of hedge funds, the game rules of market arbitrage are changing )
Desperate gamble? 10% perpetual preferred stock is a higher leverage.
The 10% perpetual preferred shares of Strategy will incur an annual interest expense of $50 million, and the company's current negative cash flow situation makes it a huge challenge to pay this dividend. Cochran described this decision as "a pointless stupid move" and pointed out that Strategy's market value far exceeds its actual asset value. Once the market bubble bursts, the stock price is likely to face a sharp decline:
Nowadays, the company's eagerness to launch a 10% compound interest yield product seems even more unreasonable for a company whose asset value is overvalued by 6 times, is continuously losing money, and has no clear purpose in the short term.
And joked, "In addition to paying the interest on this new debt, you even have to find a way to deal with the $1 billion debt due in 2027."
Here, as concerns about whether the Strategy can effectively manage capital flow emerge, the company's financial stability and whether it will sell Bitcoin have become the focus of everyone's attention.
( MicroStrategy strategy liquidation doubts resurface: How will the Bitcoin price plunge affect this company? )
Potential Crisis in the Bitcoin Market: How Long Can High-Leverage Strategies Last?
The leverage strategy of Strategy has always been an important barometer influencing global views on the Bitcoin market. Currently, Strategy holds approximately 499,000 Bitcoins, with a total cost of about 41.3 billion dollars and an average price of 66,000 dollars. If the company is forced to sell off due to a financial crisis, it could become the catalyst for market turbulence or even a crash.
However, due to the staggered maturity dates of Strategy's debts, and the possibility that some creditors may choose to convert their debts into equity, it may be able to avoid large-scale sell-off pressure in the short term. However, if the Bitcoin price remains low for an extended period, the company may struggle to maintain its current financing model and ultimately may have to sell assets to fill the financial gap.
At the same time, the financial situation of Strategy may prompt regulatory agencies to re-examine the behavior of companies investing in cryptocurrencies through low-interest bonds, which may lead to stricter regulations in the future, and even affect other Bitcoin reserve companies that emulate Strategy.
(Strategy leads the trend, a detailed guide on Bitcoin reserve strategy company investment guide)
Strategy The Key to Success or Failure in Gambling
The Bitcoin strategy of Strategy has always been regarded as an innovative case and a model for imitation by various parties, while financial risks have also been widely discussed. Cochran's analysis shows that a 10% perpetual preferred stock may only delay a crisis, rather than being a good solution to truly address financial difficulties.
In the short term, the company may be able to maintain operations through stock price premiums and debt conversions, but if the Bitcoin price declines in the long term or market confidence collapses, the financial structure of Strategy may be difficult to support.
This is not only a significant risk warning for the Bitcoin market, but it may also serve as a cautionary tale for companies venturing into cryptocurrency. Investors and regulators must continue to carefully examine the feasibility of this high-risk strategy.
This article about MicroStrategy's 10% preferred stock gamble: higher leverage, greater debt pressure first appeared in Chain News ABMedia.
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MicroStrategy Strategy: The Gamble Behind 10% Preferred Stock: Higher Leverage, Greater Debt Pressure
US tech company Strategy (, previously MicroStrategy ), has become a market focus due to its repeated large-scale purchases of Bitcoin. However, venture capital partner Adams Cochran warned that the company is facing serious financial risks due to its high-leverage betting strategy, especially with its latest issuance of 10% perpetual preferred stock, which has been described as a "desperate gamble."
Financial pressure intensifies: negative cash flow and leverage risk
Cochran pointed out that the operating cash flow (Operating Cash Flow) for Strategy had a net outflow of 53 million USD in 2024, while the levered free cash flow (Levered Free Cash Flow) reached a negative 1.06 billion USD. At the same time, the company plans to issue 500 million USD of Series A perpetual preferred stock, paying a 10% dividend annually.
(Strategy announced a $500 million preferred stock issuance plan, intending to use part of the funds to purchase Bitcoin ).
As an important indicator of financial analysis, leveraged free cash flow reflects a company's cash flow and generation capacity after considering its debt burden. In this regard, he questions whether this move is really to raise funds to support its Bitcoin strategy, or if it is to cope with the upcoming maturity of convertible bonds?
Cochran analysis indicates that the Strategy issued $650 million convertible bonds in December 2020, which will mature in December 2025, and they have recently been converted into equity at $39.80 per share, far below the current market value:
This means that the Strategy purchased Bitcoin at a price of $10,000 in 2020, paying up to $4.6 billion in equity value ( based on the current stock price estimation ), with costs magnified over 7 times. Even if Bitcoin subsequently rises to $80,000, the final return on that investment may still be close to zero.
However, some users rebutted this claim, pointing out that this batch of debt has actually brought significant profits to Strategy. For example, this fund purchased a total of 29,646 Bitcoins, which now has a market value of 2.417 billion USD, an increase of 1.57 billion USD compared to the purchase cost, indicating that this investment is not a complete failure.
However, this move still highlights the risks and concerns behind the high leverage strategy of Strategy.
( Bitcoin and MicroStrategy Strategy: The new darling of hedge funds, the game rules of market arbitrage are changing )
Desperate gamble? 10% perpetual preferred stock is a higher leverage.
The 10% perpetual preferred shares of Strategy will incur an annual interest expense of $50 million, and the company's current negative cash flow situation makes it a huge challenge to pay this dividend. Cochran described this decision as "a pointless stupid move" and pointed out that Strategy's market value far exceeds its actual asset value. Once the market bubble bursts, the stock price is likely to face a sharp decline:
Nowadays, the company's eagerness to launch a 10% compound interest yield product seems even more unreasonable for a company whose asset value is overvalued by 6 times, is continuously losing money, and has no clear purpose in the short term.
And joked, "In addition to paying the interest on this new debt, you even have to find a way to deal with the $1 billion debt due in 2027."
Here, as concerns about whether the Strategy can effectively manage capital flow emerge, the company's financial stability and whether it will sell Bitcoin have become the focus of everyone's attention.
( MicroStrategy strategy liquidation doubts resurface: How will the Bitcoin price plunge affect this company? )
Potential Crisis in the Bitcoin Market: How Long Can High-Leverage Strategies Last?
The leverage strategy of Strategy has always been an important barometer influencing global views on the Bitcoin market. Currently, Strategy holds approximately 499,000 Bitcoins, with a total cost of about 41.3 billion dollars and an average price of 66,000 dollars. If the company is forced to sell off due to a financial crisis, it could become the catalyst for market turbulence or even a crash.
However, due to the staggered maturity dates of Strategy's debts, and the possibility that some creditors may choose to convert their debts into equity, it may be able to avoid large-scale sell-off pressure in the short term. However, if the Bitcoin price remains low for an extended period, the company may struggle to maintain its current financing model and ultimately may have to sell assets to fill the financial gap.
At the same time, the financial situation of Strategy may prompt regulatory agencies to re-examine the behavior of companies investing in cryptocurrencies through low-interest bonds, which may lead to stricter regulations in the future, and even affect other Bitcoin reserve companies that emulate Strategy.
(Strategy leads the trend, a detailed guide on Bitcoin reserve strategy company investment guide)
Strategy The Key to Success or Failure in Gambling
The Bitcoin strategy of Strategy has always been regarded as an innovative case and a model for imitation by various parties, while financial risks have also been widely discussed. Cochran's analysis shows that a 10% perpetual preferred stock may only delay a crisis, rather than being a good solution to truly address financial difficulties.
In the short term, the company may be able to maintain operations through stock price premiums and debt conversions, but if the Bitcoin price declines in the long term or market confidence collapses, the financial structure of Strategy may be difficult to support.
This is not only a significant risk warning for the Bitcoin market, but it may also serve as a cautionary tale for companies venturing into cryptocurrency. Investors and regulators must continue to carefully examine the feasibility of this high-risk strategy.
This article about MicroStrategy's 10% preferred stock gamble: higher leverage, greater debt pressure first appeared in Chain News ABMedia.