I Bought Strategy In 2022 – Why I’m Not Buying Now

Summary Strategy trades at a ~1.6x NAV premium, but current justifications—BTC yield, regulatory ease, and financial engineering—are insufficient for long-term value, in my view. I think the company’s shift from ‘Bitcoin Development’ to ‘Bitcoin Treasury’ has diluted its focus, with little innovation beyond holding Bitcoin and legacy software. Shareholder dilution to increase BTC per share works in bull markets but is unsustainable if sentiment shifts or a bear market emerges. I rate MSTR a ‘Hold’: I see more value in direct Bitcoin ownership, unless MSTR develops real Bitcoin-linked financial products or services. Strategy ( MSTR ) is a self-defined “Bitcoin Treasury Company” with roughly $60 Billion worth of Bitcoin ( BTC-USD ), trading at around $100 Billion in market capitalization at the time of writing. I have covered MSTR in the past , trying to understand whether the NAV premium vs. Bitcoin holdings was justified. I downgraded the company to a HOLD in February, after finding limited progress in Saylor’s vision for the company. Today, following a new quarter of earnings and more news, I ask myself a question: why should I buy $60 worth of Bitcoin for the price of $100, instead of simply buying $100 worth of Bitcoin ? In other terms, is Michael Saylor’s ‘magic sauce’ worth a 1.6X NAV premium? Debunking Strategy’s ‘NAV Premium’ VanEck recently published a great piece on Seeking Alpha on Strategy. I encourage readers who are not familiar with the company to read it. In that article, they theorize how Strategy’s NAV premium is a function of three factors: Market expectations about Strategy increasing its BTC per share. A “regulatory premium” connected to the fact that MSTR is easier to trade than Bitcoin and more accessible via traditional brokerages. Strategy’s use of financial leverage to conduct Bitcoin-related financial transactions. To be clear, I fully agree these three elements are the reason why MSTR trades at a premium against its mere BTC holdings. However, I believe that MSFT is currently not “fairly valued” and that these three elements are not sufficient to justify its NAV premium. First, for what concerns an increase in BTC per share, Strategy’s BTC Yield is at ~17% YTD , with a 25% 2025 target announced during Q1 earnings. This means that Bitcoin per share has increased by 17% year to date. At this rate, it would take an investor roughly 3.2 years to “recover” the premium they paid for by choosing to buy Strategy instead of Bitcoin directly today. At a 25% yield, it would take them 2.2 years. This means that theoretically, new investors in MSTR can assume to start getting “Bitcoin dividends” (i.e. get more BTC per share against what they paid for) in 2 to 3 years from now . However, this assumes that Saylor can keep up the BTC yield figure at above 15% for that period of time. This in turn relies on the ability of MSTR to keep diluting shareholders to buy more Bitcoin (or “monetizing volatility”, in Saylor’s words ). MSTR can increase its BTC Yield only as long as it trades at a NAV Premium – a premium that is in turn ‘justified’ by their ability to increase BTC Yield. This apparent paradox is also the reason why I do not see this system as sustainable long term, nor enough of a reason per se to justify a NAV premium at all. The moment MSTR ceases to trade at a premium, its ability to dilute shareholders and buy BTC (increasing BTC per share in return) will stop. The second reason that could justify a NAV premium is the “regulatory premium”. I find this narrative outdated, as today there are many ETFs that can be used to buy Bitcoin directly. It is true that in some specific use cases (specific retirement accounts not allowing for BTC ETFs), MSTR can still provide BTC exposure. But I think overall the maturity of the sector, especially under the current US administration, makes Strategy fundamentally unattractive as a simple Bitcoin proxy. The third reason justifying a NAV premium – Strategy’s ability to financial engineer Bitcoin products – is in my view the real point of discussion. This is what I will cover next, in more detail. MSTR: From a ‘Bitcoin Development’ to a ‘Bitcoin Treasury’ Company Strategy rebranded in February 2025 as a “Bitcoin Treasury Company”. To be honest, I prefer what Strategy used to call itself until before the rebranding: a “Bitcoin Development Company”. I think the latter definition implied how Strategy would actively try to develop Bitcoin-related financial solutions, and participate in the evolution of the Bitcoin blockchain as one of the major single holders of Bitcoin. In contrast, I think Strategy has blurred its mission following the rebranding. It now merges its Bitcoin “HODL” strategy with its legacy software business, calling out how they “provide cloud-native, AI-powered enterprise software […] to explore innovation in Bitcoin application” (see image below, taken from Strategy’s “About Us” section). Strategy Website I do not know exactly what this claim means, nor I am sure whether Strategy’s legacy software business has any connection with their Bitcoin Treasury. When it comes to what exact Bitcoin-related activity Strategy is pursuing, for the last five months the company has done what follows: Rebranded and revamped their corporate website, including a home page Dashboard calling out key BTC and fiat company figures. Launched an e-commerce sub-website , where users can buy Strategy and Bitcoin themed gadgets. Offered $2 Billion in Convertible Notes and proposed a $250 Million preferred stock offering – which effectively would allow third parties to join Strategy’s system of diluting existing shareholders in fiat terms. Personally, I do not see any “AI-powered” Bitcoin applications in what was done so far this year. The reality, as I see it, is that Strategy’s legacy software is a business that generated just about $110 Million in Q1, decreasing 3.6% per year. While this business is highly profitable, at a ~69% margin, it can hardly justify the company’s generous valuation. A declining business with about $770 Million in yearly gross profit is minuscule when compared to Strategy’s $40 Billion premium over its Bitcoin holdings. I would not evaluate Strategy’s software business at more than $5 Billion, even with generous growth assumptions that have not materialized yet. In this regard, I would prefer to see Strategy completely detaching itself from its legacy software business – potentially spinning it off in a new company and buying Bitcoin with the proceeds. Strategy, in my view, would benefit by focusing on issuing new financial products linked to Bitcoin that could justify its NAV premium. These may include offering margin loans on Bitcoins, providing consultancy services to companies that are considering adopting Bitcoin and hiring developers to actively participate in the long-term development of the BTC blockchain. That was my original bull thesis for MSTR, which I covered on Seeking Alpha in May last year. Since then, Strategy has failed to impress me in terms of how it is developing. I don’t see it going in the direction of being a “Bitcoin bank” , but rather a business with an unclear focus on legacy software and simply holding Bitcoin. That’s why I keep rating it a HOLD for now, waiting to see more developments from its leadership. How I Traded Strategy in 2022 In my thesis so far, I have reasoned in Bitcoin, not in figures expressed in fiat currency. That’s the approach that in my view makes the most sense with MSTR, given the company is fully invested in its Bitcoin strategy. Investors should in theory not care at all about fiat figures, as they are getting diluted in exchange for an increasing BTC per share figure. However, I think the elephant in the room with Strategy is that investors are primarily driven by the idea that the company will overperform Bitcoin and provide them outsized returns in fiat terms in the short run. In other terms, the market sees MSTR as a leveraged BTC bet. I believe this is the fundamental reason why Strategy’s system of diluting shareholders is working so far. In a BTC bull market, euphoria and greed can keep Strategy’s system of diluting shareholders to increase BTC yield running. Should Bitcoin correct and enter a bear market, I think Strategy would need a new, more solid rationale to keep justifying a NAV premium (and keep increasing its BTC holdings). The problem is that Strategy has historically provided outsized returns to shareholders precisely when bought during BTC bear markets . That’s what I did in 2022, opening a position in MSTR when the company was trading at a NAV discount of between 0.6X and 0.9X its BTC holdings. I converted most of my MSTR position to Bitcoin in early 2025, when I also downgraded the company from BUY to HOLD on Seeking Alpha. I think buying today is a far riskier proposition , given investors are buying at a premium that may or may not close in 2 to 4 years , assuming a BTC bear market does not manifest before. Risks to My Thesis The main risk with my “HOLD” investment thesis is missing out on outsized returns compared to Bitcoin. While Strategy has lagged relative to Bitcoin in the last 6 months, it is still vastly overperforming Bitcoin in all longer time frames. Strategy could overperform Bitcoin as a result of two elements. First, should the Bitcoin bull run continue, this may attract more investors into MSTR (the “greed” effect I describe before). This would fuel Strategy’s proven system, where Saylor dilutes shareholders in fiat terms to have them gain in BTC terms (albeit starting at a significant premium for the BTC they paid for). The second element concerns Saylor’s dilution in fiat terms. Strategy’s shares outstanding have increased significantly in the past two years, with a ~48% growth in Q1 2025 alone, as shown by the chart below. MSTR shares outstanding (MacroTrends) By pausing shares dilution, Strategy can effectively have shareholders benefit in fiat terms. To be clear, I do not expect that to happen in the case of a BTC bull run. Saylor has been very clear about focusing on BTC Yield, and I find it unlikely Strategy will limit shareholders’ dilution in a bull market. I would, however, expect them to stop dilution in case the NAV Premium gets closer to 1X. The less premium, the less BTC Yield MSTR can achieve by diluting shareholders. Conclusion In my opinion, Michael Saylor has yet to prove why his company is worthy of a NAV premium against BTC holding in the long run . Behind many of the fancy words the company uses, such as “monetizing volatility” or “leverage 35+ years of software expertise to explore innovation in Bitcoin applications”, the company runs a fairly simple system based on retail interest: Investors buy MSTR because they believe it will overperform BTC even starting at a NAV premium, fueled by greed during a BTC bull market. Strategy dilutes investors to buy more Bitcoin, increasing its BTC yield (i.e., how much BTC shareholders are “entitled to” for each of their shares). An increase in BTC yield, in turn, fuels the investment narrative of MSTR as a “Bitcoin Treasury Company”. I think this system can only be sustainable long term if Strategy proves there are fundamentals on why a NAV premium is justified . In other terms, I do not see it sustainable just based on an increasing BTC yield narrative. Strategy could, for example, launch financial products linked to Bitcoin or consultancy services tied to adopting Bitcoin as a corporate treasury holding. While Strategy has shown some progress in that direction, I do not see any significant progress yet. That’s why I rate the company a HOLD. If you own a small amount of MSTR stock with a safe margin, I recommend holding it as a bet. Personally, I still have faith in Michael Saylor and am eager to see if Strategy will offer Bitcoin services to bridge traditional finance and Bitcoin. However, I would rather buy more Bitcoin than trusting

Source: Seeking Alpha