Peter Schiff has warned that Strategy, formerly known as MicroStrategy, could face pressure from its latest funding approach.
Summary
- Peter Schiff warned that Strategy’s preferred shares could increase pressure on its Bitcoin treasury plan.
- Schiff said the 11.5% yield may force Strategy to raise capital or sell Bitcoin.
- Strategy supporters argue Bitcoin gains can cover costs, but Schiff says new issuance changes the math.
The gold advocate and long-time Bitcoin critic focused on the company’s use of high-yield preferred shares. Schiff said the preferred shares carry an 11.5% yield. He argued that this creates a large cost for Strategy as the company continues to raise funds linked to its Bitcoin buying plan.
Strategy supporters argue that Bitcoin needs to rise only 2% each year to help cover the yield on the preferred shares. Schiff challenged that view and said it does not account for more issuance.
“The more STRC MSTR sells, the more BTC must rise to cover the yield,” Schiff wrote.
His comment suggested that each new preferred share sale could raise the pressure on Strategy’s Bitcoin holdings. Schiff also said Strategy lacks normal corporate earnings that can easily fund these payouts. He argued that this could force the company to raise more capital or sell Bitcoin.
Bitcoin sales could pressure Strategy
Schiff warned that a forced Bitcoin sale could create more market pressure. In his view, selling Bitcoin may lower the asset’s price and make Strategy’s balance sheet weaker.
He also said a fall in the preferred shares could push the company to offer higher yields. That could raise funding costs and increase the strain on Strategy’s capital structure.
“The only way to stop the death spiral is for MSTR to cancel the dividend,” Schiff said. He added that such a move could hurt STRC, MSTR, and Bitcoin.
Saylor’s Bitcoin strategy faces scrutiny
Michael Saylor has built Strategy into one of the largest corporate Bitcoin holders. The company has used debt, equity sales, and other instruments to add more BTC over several years.
Schiff said on April 18 that Strategy can no longer rely as easily on selling common shares at a premium. He claimed the company may need to sell more preferred shares, discounted common stock, or Bitcoin to meet its obligations.
The warning adds to the debate around Strategy’s Bitcoin treasury model. Supporters see the approach as a long-term Bitcoin bet, while critics say rising funding costs could create risk if Bitcoin prices weaken.
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