Strategy: Unusual Insider Purchases Support Rating Upgrade

Summary Recent insider purchases surrounding Strategy caught my attention. These purchases are unusual considering the dominating insider selling both for MSTR and also the overall market. They signal a potential shift in insiders’ sentiment and outlook for MSTR. But despite the record bitcoin price, MSTR still trades at a large premium to its bitcoin holdings and book value. MSTR stock’s recent insiders’ activities I last wrote on Strategy Incorporated (MSTR) stock about 1 year ago in May 2024 with an article titled “MicroStrategy Stock: Sell With The Insiders”. Note that the company has changed its name to Strategy recently. That article focused on the near-term risks I saw at that time, in particular the insiders’ selling activities, and concluded with a sell rating. Since then, there have been a few material changes for the stock. In the remainder of this article, I will elaborate on the top 2 on my radar: the changes in insider activities and also the new outlook in bitcoin prices. These changes lead me to see an improvement in the return/risk ratio for MSTR and an upgrade rating to hold. Let me start with the insiders’ latest disclosures. The table below summarizes the insider transactions disclosed in the past 3 months. As you can see, the transactions were still dominated by selling activities, totaling more than $40.3 million. However, a few unusual purchases caught my attention. The most recent insider purchases were disclosed by Patten Jarrod on June 9, 2025. The director of MSTR bought 5,000 of MSTR’s preferred shares at a price of ~$85 per share for a total of $425k. Shao Wei-Ming, an EVP of MSTR, also disclosed a similar purchase with a sizable total of around $300k. Overall, insiders’ purchases in the past 3 months totaled more than $2.3 million. DataRoma MSTR stock: insider purchases in focus The above transactions were unusual in my mind for a couple of reasons. First, as just mentioned, MSTR’s insider transactions used to be completely dominated by sellers as detailed in my last article. Thus, the recent insider purchases could signal of a change of sentiment among the insiders. Second, the insider activities in the overall stock market have also been dominated by insider sales lately. For instance, the next chart displays the net buy/sell transactions in the overall market in the 2 months. As seen, the picture is heavily dominated by sales shown by the red bars. Insider purchases (shown by the green bars) are so dwarfed in comparison. Although, note that the above insider purchases were for MSTR’s preferred shares. As a background, MSTR recently issued three preferred stocks, a 8% Series A Perpetual Strike Preferred Stock (NASDAQ: STRK ), a 10% Series A Perpetual Strike Preferred Stock (NASDAQ: STRF ), and a 10% Series A Perpetual Stride Preferred Stock (NASDAQ: STRD ). Preferred shares, of course, have different characteristics when compared to the common shares. However, my view is that the preferred and the common shares are based on the same business fundamentals. As such, I consider the purchase of the preferred shares disclosed by the insiders as a reflection of improved business fundamentals for MSTR, as detailed next. Insider transactions MSTR stock: bitcoin holdings The preferred shares, together with other sources of funds (to be detailed more later), provide more financial resources for MSTR to continue to acquire Bitcoins ( BTC-USD ) and also invest in its infrastructure. Of course, such a strategy is sustainable in the long term only if BTC shows sufficient price appreciation. The developments surrounding BTC since my last writing, especially the potential policy changes from the Trump administration, have led me to feel more optimistic about the long-term potential of BTC. Thanks to the improved prospects of BTC and also the large price rally since my last writing, MSTR’s bitcoin holdings have enjoyed a drastic expansion in valuation. As seen, the company has held Bitcoin since 2020 and continued to add to its position. It currently holds 597,325 BTC with an average cost of around $70,982. With the current BTC price, this results in a significant gain of close to 55%. The current market value of these Bitcoin holdings is $65.64 billion. Source: bitcointreasuries.net Despite this substantial rise in its Bitcoin valuation, MSTR’s current overall market capitalization of $114.4 billion still is at a large premium over its direct Bitcoin holdings and/or its book value. As seen in the chart above, Bitcoin’s value accounts for only about 57.4% of its market cap. In terms of book value, the current stock price represents a ratio of more than 3.55x as you can see from the following chart. Seeking Alpha Other risks and final thoughts There are certainly some reasons that could help to justify the above premium over its BTC holdings and/or book value. To start, I consider MSTR a leveraged play on BTC due to its ability to raise capital via debt, the preferred shares mentioned above, and also equity offerings. This ability to raise capital, combined with the company’s expertise to use various strategies, certainly justifies some premium. Secondly, while MSTR is almost synonymous with Bitcoin in many investors’ mind, it is fundamentally an enterprise software company with organic operating income. Its operation segments, even if overshadowed by Bitcoin, still generate revenue and profits and should, of course, add to the company’s valuation. In terms of downside risks, MSTR’s cash flow from operations has seen quite small and very unstable though as you can see from its following cash flow statement. Over the past 2 years, the company reported a positive cash flow for 3 of them. In the past quarters since June 2024, the company has been reporting negative cash from operations of in the range of -$23.3 million to -$2.4 million in the most recent quarters. In the meantime, Capital expenditure has risen substantially. It totaled $1.1 million for the June and Sept quarters of 2024 but rose to $10.8 million in the December 2024 quarter and $8.7 million in the March quarter of 2025. Seeking Alpha As a result, the company has been relying heavily on debt financing. As shown in its following balance sheet, MSTR’s long-term debt has surged considerably. In the past two years alone, its long-term debt has dramatically increased to the current level of $8,140 million from about $2,182 by the end of 2023. As just mentioned, such a leverage strategy is only sustainable for the long run if BTC prices keep appreciating in my model. To recap, this reexamination on MSTR (and also its associated preferred shares) is motivated primarily by changes since my last writing: the changes in insider activities and also the new outlook for bitcoin prices. After weighing these changes, I now see a better balance between its upside potential and downside risks, leading to a rating upgrade to hold. Seeking Alpha

Source: Seeking Alpha