Strategy built the biggest corporate bitcoin stash on earth — over $50 billion worth, roughly 4% of every bitcoin that will ever exist — and paid for it by issuing stock, debt, and a family of preferred shares. For years the pitch rested on a metric the company itself invented: mNAV, the ratio of the company’s value to the value of its bitcoin. Above 1, the machine hums — sell new paper at a premium, buy more coin, repeat. The Journal’s Heard on the Street column, in a sharp piece by Jonathan Weil, walks through what happens when the number crosses under 1: the machine doesn’t just stop. It runs backward.
Last month, mNAV fell below 1 by the company’s own reckoning — just under 0.99 as reported on June 26. But even that flatters it. Strategy counts its $6.75 billion of debt and $15.46 billion of preferred stock at par; the debt actually trades about 7% below par and the preferreds at roughly a 28% discount. Marked at market values, mNAV was more like 0.89. As of Monday, the company’s website says 1.06; at market values it’s about 1.01 — a rounding error above the waterline. All this with bitcoin around $63,900, roughly half its October peak above $126,000.
The company’s creed was that it would never sell — hold on for dear life. Then, in May, came the first-ever sale: 32 bitcoins, $2.5 million, small enough to call symbolic. On June 29, the board authorized selling up to $1.25 billion of bitcoin to fund share buybacks, interest payments, and preferred dividends — and, in the same breath, raised the dividend on its STRC “Stretch” preferred to 12%. Monday’s disclosure: 3,588 bitcoins sold last week for $216 million. The cash buffer stands at $2.55 billion — about 17 months of interest and preferred dividends before it must sell more crypto to keep paying.
We flagged this exact mechanism in our June 23 piece on the Stretch preferred, when the coupon had already been raised repeatedly to keep buyers coming. We said then that the yield was the warning label — that 12% isn’t a gift, it’s the price of the next dollar. A company that could borrow at normal rates would. One that must offer 12%, from a treasury made of one volatile asset trading at half its peak, is telling you precisely how risky its promise is. The market agrees: those preferreds change hands at a 28% discount to face value, which is the bond market’s way of saying it does not expect to be made whole at par.
Retirees are the natural target for a 12% “income” product, because 12% sounds like a pension and reads like a promise. Now you can see the machinery behind the number: the dividend is paid by selling bitcoin; the bitcoin is worth half its peak; the buffer is 17 months; and the common stock beneath you is down 75%. Compare the honest alternative: short-term Treasurys paying north of 4%, backed by the ability to tax the wealthiest economy on earth — not by a treasury that must sell its only asset into a falling market. The gap between 12% and 4% is not free money. It is the exact, market-priced measure of the risk you’re being asked to carry.
First, if any “income” yield is triple the Treasury rate, ask what has to be sold to pay you — if the answer is “the company’s only asset,” you have your answer. Second, watch issuer-invented metrics: any measure a company designs about itself will be flattering until the day it can’t be, and mNAV crossing 1 shows how fast that day arrives. Third, note the pattern of promises — “never sell” became 32 coins, then $216 million a week, in about sixty days. Fourth, if you hold paper like this and it funds actual retirement spending, size it like the speculation it is, not the bond it impersonates. Real income comes from cash flows that don’t require selling the collateral.