History is always remarkably similar — is the financing dilemma for Strategy just beginning?

Given that this situation is not the first time, since 2022, mNAV has fallen below 1 three times, and now it can't even be counted as the fourth time, because it has not yet gone below 1. Therefore, Strategy is not completely without options, but every method is becoming increasingly expensive.

In the past, the most comfortable time for Strategy was when BTC rose, MSTR rose, common and preferred stocks sold well, and the market was willing to provide funds. Strategy obtained funds to continue buying BTC and further strengthened the narrative of the Bitcoin treasury company. When this cycle ran smoothly, everyone regarded Saylor as a genius; the more funds raised, the more coins bought, and the market was more willing to continue supporting.

But now the situation has reversed. BTC fell, MSTR fell, STRC couldn't return to around $100, STRD and STRK have already fallen to over $50, and further issuance of common stock ATM would dilute more, while preferred stock investors are demanding higher returns again. Of course, Strategy still has options, as evidenced in history.

First: Preserve dollar cash.

Preferred shareholders are most concerned about whether dividends can continue to be paid, creditors are concerned about whether interest can be paid on time, and the market is concerned about whether Strategy will be forced to sell BTC. As long as dollar cash is sufficiently abundant, the market won't immediately worry that Strategy can't pay dividends.

But once the market begins to doubt whether there is enough cash, even if Strategy still holds a lot of BTC, preferred stocks will fall first. Because buyers of preferred stock are looking for dollar dividends, not for accompanying Saylor in discussing Bitcoin beliefs.

Second: Slow down the pace of buying Bitcoin.

Previously, the more BTC bought, the more excited the market was because it represented aggression and an ongoing increase in BTC per share. But now, if STRC is still in the $70 range, and STRD and STRK are still in the $50 range, and Strategy continues to buy BTC on a large scale, the market will instead worry whether the company is being too aggressive.

At this stage, what Strategy should prove most is its ability to survive during the downturn of BTC, as mentioned earlier, spend less money and save more.

Third: Prefer common stock ATM.

Common stock ATM is certainly not good for common shareholders because it dilutes shares, and the lower the stock price, the more apparent the dilution. But from the company's perspective, common stock ATM remains the most flexible option. Common stock has no fixed dividends and no repayment issues, making it lighter than continuously increasing the preferred stock dividend rate.

If Strategy still wants to increase dollar cash, the most realistic way is likely still through common stock ATM, but it cannot issue continuously like during favorable periods, otherwise it might easily result in a scenario where the stock price falls further as more shares are issued, causing even more market fear.

Fourth: STRC price should return to above $90.

STRC is the most important preferred stock financing tool for Strategy. Now that it has fallen to over $70, it indicates that the 11.5% dividend yield is no longer attractive. Strategy can continue to increase the STRC dividend rate and attempt to pull the price back to around $90 or even $100.

However, since STRC is too large, each 1 percentage point increase in the dividend rate could lead to a burden of over a hundred million dollars in the long run. STRC needs to stabilize market confidence, but must not increase future dividends to a larger burden just to pull the price back up.

Fifth: Buy back high discount preferred stocks at low prices.

For example, if STRD and STRK stay at over $50 for a long time, Strategy can consider repurchasing a portion if allowed by regulations. Preferred stocks with a face value of $100 and a 10% dividend can be bought back for over $50, which effectively uses just over half the money to eliminate the $100 face value and the corresponding future dividends.

This action is more defensive than continuously buying BTC; the advantage is that it can reduce the dividends to be paid each year and also signal to the market that the company believes its preferred stock is undervalued. Of course, this method will also consume dollar cash, so it can only be used when cash is safer and the discount is deep enough.

Sixth: Selling BTC should be the last resort.

Selling BTC may not be financially fatal for Strategy immediately, but it is narratively very costly. In extreme situations, Strategy can sell a small portion of BTC through OTC trading or in a more moderate way to supplement dollar cash.

However, once Strategy starts selling BTC, the market will immediately wonder whether this company is still the same Bitcoin treasury company that only buys and doesn’t sell? Will it continue to sell in the future? When will it sell? How much will it sell? Once this narrative changes, the valuation logic of MSTR will also change.

Therefore, the most reasonable order for Strategy now should be to first preserve dollar cash, slow down the pace of continued BTC purchases, use common stock ATM to maintain financing capabilities, cautiously increase the STRC dividend rate to pull the price back, and if necessary, buy back some deeply discounted preferred stock at low prices, use debt market funds when possible, but if conditions are too poor, it should endure and only consider selling BTC as a last resort.

The real trouble now is whether the market is still willing to believe in Strategy's ability to continue financing.

If BTC stabilizes, MSTR stabilizes, STRC returns to above $90, STRF does not continue to fall, and STRD and STRK gradually recover from over $50, then Strategy still has the opportunity to bounce back.

If BTC continues to fall, MSTR continues to fall, STRC remains stuck in the $70 range, and STRD and STRK linger at over $50 for a long time, then Strategy is not completely without options, but every option will become increasingly expensive, common shareholders will endure more dilution, preferred stocks will require higher dividends, and in the worst case, even BTC may have to be liquidated for dollar cash.

This is what Strategy now truly needs to confront.

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