Strategy's stock has suffered a significant decline. Shares fell 11% following Bitcoin's recent price drop.
The company, formerly known as MicroStrategy, saw its stock close at $250 according to Yahoo Finance. This represents a 55% decline from its all-time high reached in November 2024.
The sharp fall has prompted market speculation about whether Strategy might be forced to liquidate its substantial Bitcoin holdings. Financial analysis firm The Kobeissi Letter addressed these concerns in a recent report.
"Forced liquidation of MSTR is not necessarily impossible. But, it is highly unlikely. It would need a 'mayday' situation to occur," the report stated.
The Kobeissi Letter explained that Strategy's business model centers on raising capital rather than selling Bitcoin. The company finances its cryptocurrency purchases by issuing 0% convertible notes and selling new shares at premium prices. This approach has allowed Strategy to avoid liquidating assets even during previous market downturns.
Current figures show Strategy holds approximately $43.4 billion in Bitcoin against $8.2 billion in debt, resulting in a leverage ratio of about 19%. Most of this debt consists of convertible notes with conversion prices below the current share price and maturities extending to 2028 and beyond. This structure provides the company with considerable financial flexibility.
However, The Kobeissi Letter noted that Strategy's capital-raising capacity is not unlimited. "In a situation where their liabilities rise significantly higher than their assets, this ability could deteriorate," the analysis warned. While this would not automatically trigger liquidation, it could constrain the company's financial options.
For actual liquidation to occur, The Kobeissi Letter explained that either a stockholder vote or corporate bankruptcy would first be necessary. This scenario seems unlikely given that Michael Saylor holds 46.8% voting power, effectively blocking such moves without his consent.
Saylor has consistently championed Bitcoin's long-term growth potential. The company reinforced this position last week by adding 20,356 Bitcoin to its holdings.
The Kobeissi Letter identified the real risk period as post-2027, when Strategy's convertible bonds begin to mature. If Bitcoin's price falls more than 50% and remains depressed, the company could face difficulties refinancing or repaying its debt obligations.
"Maintaining investor confidence will be crucial for MSTR in the wake of downswings," the publication concluded. While immediate liquidation appears unlikely, the longer-term risks associated with Bitcoin volatility and Strategy's debt structure remain significant concerns for investors.
Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or legal advice. Always conduct your own research or consult a professional when dealing with cryptocurrency assets.