Strategy's BTC Arbitrage Weakens as Shares Trade Below Asset Value

Source: CryptoTale Original Title: Strategy’s BTC Arbitrage Weakens as Shares Trade Below Asset Value Original Link: https://cryptotale.org/strategys-btc-arbitrage-weakens-as-shares-trade-below-asset-value/ Strategy’s Equity Premium Fades as Stock Declines Outpace Bitcoin Holdings

Strategy is entering a critical phase as its long-running Bitcoin strategy adjusts to new market conditions. The company’s stock declined 49.35% in 2025 and now trades below the market value of its Bitcoin holdings. This shift weakens the arbitrage logic that once supported equity-funded purchases. The change comes as Strategy continues to expand holdings and introduce new financial instruments.

Attention increased after veteran value investor Christopher Bloomstran criticized the company’s approach. In recent comments, Bloomstran said Strategy’s financing model has become mathematically unfavorable. He focused on the relationship between market capitalization and Bitcoin assets. His comments highlighted dilution risks tied to current equity issuance.

Strategy’s Equity Premium Enabled Accretive Bitcoin Purchases

In earlier years, Strategy benefited from a strong valuation premium. Its shares traded well above the value of Bitcoin on its balance sheet. That gap allowed the firm to issue equity efficiently. Proceeds could be used to buy Bitcoin without reducing per-share exposure.

That advantage has faded. Strategy’s market capitalization now represents about 82% of the market value of its Bitcoin holdings. Under these conditions, issuing new shares reduces value per share. Bloomstran described the outcome as unfavorable math rather than market timing.

Stock performance data underline the shift. Strategy shares declined for six consecutive months during the second half of 2025. Losses were recorded from July through December. This marked the first such sequence since the company adopted Bitcoin as a treasury asset in August 2020.

The monthly declines were sharp. Shares fell 16.78% in August and 16.36% in October. November saw a 34.26% drop, followed by a further 14.24% decline in December. These losses contributed to the full-year drop of 49.3%.

Past cycles showed a different pattern. Large drawdowns were often followed by strong rebounds. During the 2022 market downturn, rallies of more than 40% appeared within months. The absence of similar recoveries in late 2025 suggests a longer repricing phase.

Despite weaker equity performance, Strategy continued accumulating Bitcoin. On December 29, the company disclosed the purchase of 1,229 BTC. The transaction cost approximately $108.8 million. The implied price was around $88,568 per Bitcoin.

Strategy Expands Bitcoin Holdings While Adding 11% Dividend

Total holdings remain substantial. As of late December, Strategy reported owning 672,497 BTC. The company said the assets were acquired for about $50.44 billion. No change to the accumulation policy has been announced publicly.

At the same time, Strategy introduced a new dividend instrument. The security offers an 11% yield. The instrument is scheduled for issuance in January 2026. The move immediately drew scrutiny from value-focused investors.

Critics argue the dividend alters the company’s financial profile. A high-yield payout increases fixed obligations while equity trades below asset value. Bloomstran said this combination reflects defensive balance-sheet management. He questioned whether the move supports long-term value creation.

The timing of the dividend has also raised concerns. Issuing an 11% yield instrument alongside ongoing dilution risk changes capital structure dynamics. Analysts describe the approach as financial engineering.

The equity premium that once supported accumulation has narrowed. Continued Bitcoin purchases increase exposure without the same funding benefit. Investors are watching how management responds.

Strategy has not paused purchases or reduced holdings. Public statements continue to emphasize long-term conviction in Bitcoin. No revisions to treasury policy have been disclosed.

Market conditions, however, differ from earlier cycles. Equity investors are placing greater emphasis on balance-sheet mechanics. With the premium gone, funding efficiency carries more weight.

For now, Strategy remains committed to its approach. Stock performance, accumulation pace, and new instruments are moving in parallel. The outcome will influence how the market views Bitcoin-led corporate balance sheets going forward.