Critical analysis of Financial Times’ take on Strategy’s Bitcoin approach

The Financial Times recently published an article titled “Saylor’s Strategy: buy higher, pump harder” that examines Strategy’s Bitcoin accumulation approach. While the article captures some aspects of Strategy’s business model, it contains several inaccuracies and mischaracterizations that deserve correction. This analysis will address the key claims and provide accurate context based on Strategy’s actual financial structure and performance.

Mischaracterizing Strategy’s business model

The FT article describes Strategy as a “high-octane bitcoin investment vehicle” that has abandoned its software business. This characterization oversimplifies Strategy’s business model, which is more accurately described as a Bitcoin treasury company that continues to maintain its enterprise analytics software operations.

While Strategy’s primary focus has indeed shifted to Bitcoin acquisition and leveraging capital markets to increase Bitcoin per share, the company hasn’t abandoned its original business. The software division continues to operate and provide some cash flow to support operations, though it’s no longer the primary growth engine of the company.

Inaccurate portrayal of financial engineering

One of the most significant mischaracterizations in the article concerns Strategy’s financial engineering approach. The author states:

“Strategy’s legacy software business does not generate cash. Servicing the high dividend on STRK will require further financial engineering, most likely through additional equity issuance. This will inevitably lead to dilution for existing common stockholders.”

This statement fundamentally misunderstands Strategy’s approach to what they term “accretive dilution.” When Strategy issues shares at a premium to its Bitcoin NAV (currently 1.840x), it can acquire more Bitcoin per share than it dilutes. This increases Bitcoin per share for existing shareholders rather than diluting them in the traditional sense.

The article also fails to acknowledge Strategy’s Bitcoin yield metric, which stands at +10.97% year-to-date. This metric measures how effectively Strategy increases its Bitcoin holdings relative to share dilution, and a positive yield indicates that Bitcoin holdings are growing faster than share count.

Misrepresenting investment performance

The FT article claims:

“Since its shift to bitcoin four-and-a-half years ago, Strategy’s cumulative return on its bitcoin holdings is a modest 20 per cent, while bitcoin has soared by around eight times.”

This statement is misleading for several reasons:

1. Strategy has been accumulating Bitcoin continuously since 2020, not making a single investment at a fixed point in time. A significant portion of its current holdings of 538.200 BTC was acquired in the past 12-18 months.

2. Strategy’s average acquisition cost is USD 67,766 per Bitcoin, with current unrealized gains of +USD 13.684 bln, representing a return of +37.52%. This is actually quite reasonable given the timeline and scale of accumulation.

3. The article ignores Strategy’s total shareholder returns, which have significantly outperformed Bitcoin over certain periods due to the leverage effect of its financial structure.

The “buying high” misconception

The article criticizes Strategy for “buying high, not low,” suggesting this is poor investment strategy. This criticism misunderstands Strategy’s business model.

Strategy issues convertible bonds and equity when market conditions are favorable, which typically coincides with higher Bitcoin prices. This is actually a strength of the model - the company can raise capital at better terms during periods of market strength. It’s a feature, not a bug, as the article begrudgingly acknowledges.

The suggestion that Strategy should somehow time the market to buy Bitcoin at lower prices ignores the reality of capital markets. Strategy’s approach is to continuously accumulate Bitcoin over time, focusing on increasing Bitcoin per share rather than timing market bottoms.

Misleading claims about dilution and STRK

The article portrays Strategy’s STRK preferred shares primarily as a dilution mechanism:

“This will inevitably lead to dilution for existing common stockholders. STRK, in effect, functions as a perpetual payment-in-kind instrument, combined with an out-of-the-money call option — an elegantly convoluted mechanism primed for significant dilution.”

This characterization misses several key points:

1. STRK shares only convert to common shares if Strategy’s stock price exceeds $1,000 per share, which would represent significant appreciation from current levels.

2. If conversion occurs at these high prices, the dilution happens at prices far above current levels, potentially still being accretive to shareholders.

3. The STRK offering provides Strategy with an additional capital-raising tool that diversifies its funding sources beyond convertible bonds and common equity.

Exaggerated claims about executive selling

The article states:

“This has enabled insiders to cash in massively, with senior executives unloading $568mn of stock in 2024, including a flurry of sales by Saylor’s lieutenants near the peak in November.”

While there have been some insider sales, this statement lacks context. Most executive stock sales represent the liquidation of stock options that are part of compensation packages. These options have expiration dates and may need to be exercised regardless of stock price. The implication that executives are “cashing in” at the expense of shareholders is not supported by the pattern of long-term Bitcoin accumulation and increasing Bitcoin per share.

Overlooking Strategy’s market position

The article correctly notes Strategy’s significant Bitcoin holdings of nearly 500,000 BTC, representing 2.56% of total supply. However, it fails to acknowledge the strategic advantages this position creates:

1. Strategy has established a first-mover advantage in corporate Bitcoin adoption that would be extremely difficult for competitors to match.

2. The company’s large Bitcoin holdings create potential opportunities for future financial services and products based on its Bitcoin treasury.

3. Strategy’s inclusion in market indices like the NASDAQ 100 creates passive investment flows that strengthen its capital-raising capabilities.

The NAV premium misunderstanding

The article treats Strategy’s premium to NAV (currently 1.840x) as an anomaly without adequately explaining why this premium exists. The premium reflects the market’s recognition of several factors:

1. Strategy’s ability to continuously accumulate Bitcoin and increase Bitcoin per share through financial engineering.

2. The company’s potential to generate additional value through Bitcoin-backed financial products and services.

3. The leveraged exposure to Bitcoin that Strategy provides through its financial structure.

This isn’t an irrational market anomaly but a reflection of the added value Strategy provides beyond simple Bitcoin exposure.

Conclusion: A more nuanced view needed

While the Financial Times article raises some valid points about Strategy’s approach and the risks involved, it fails to provide a balanced and accurate portrayal of the company’s business model. Strategy’s approach to Bitcoin accumulation is more sophisticated and measured than the article suggests.

The company maintains a reasonable debt-to-Bitcoin NAV ratio of , has successfully increased Bitcoin per share through accretive capital raising, and continues to execute its strategy of becoming the premier Bitcoin treasury company.

Investors should certainly understand the risks involved—including Bitcoin price volatility, execution risks, and potential dilution if Bitcoin’s price doesn’t appreciate as expected—but they should also recognize Strategy’s pioneering role in corporate Bitcoin adoption and financial innovation. A more nuanced view of Strategy’s approach would acknowledge both the risks and the potential long-term value creation for shareholders.