Summary Strategy continues aggressive Bitcoin accumulation, funding purchases through share offerings and preferred stock. Bitcoin's recent rally has kept Strategy's share price resilient. Bitcoin in May reached a new all-time high at ~$112,000. Strategy highly leveraged, debt-financed Bitcoin strategy poses significant risks if Bitcoin's price unexpectedly declines. Despite Bitcoin's upside potential, Strategy's valuation remains stretched and there are better ways for investors to invest in the world's biggest digital currency. Given Bitcoin's recovery to new all-time highs and a more moderate premium to book value, I am up-grading shares of MSTR to hold. Strategy ( MSTR ), which changed its name from MicroStrategy in February, is continuing to offer new shares through its at-the-market offering program in order to raise cash for Bitcoin ( BTC-USD ) purchases. Strategy acquired another 26,695 Bitcoins since the beginning of May which is when the largest corporate Bitcoin owner in the world submitted its first-quarter earnings sheet that widely missed consensus estimates. Bitcoin itself, however, has seen a nice recovery rally lately, up to $112,000 which is where the digital currency marked a new all-time high. With Bitcoin interest set to only increase going forward due to institutional adoption, I believe Bitcoin’s price surge limits the risks of an investment in Strategy. Data by YCharts Previous rating I rated shares of Strategy a strong sell in my last work on the business intelligence company -- A Dangerous Gamble -- chiefly because I was concerned about the firm’s high valuation relative to the Bitcoin price. Simply put, investors in Bitcoin have a much more straightforward approach to investing in Bitcoin which is to own the digital currency outright. I am still not a big fan of Strategy given its relatively irrelevant underlying intelligence business, but the resilience and recent recovery of the Bitcoin price cause me to change my stock rating to hold. Debt-financed Bitcoin transactions Strategy continues to raise debt to finance Bitcoin purchases and since the company submitted its first-quarter earnings report on May 1, 2025, it has spend millions more on BTC. The Bitcoin company generated a loss of $16.53 per-share in adjusted earnings in the first-quarter, missing estimates by a mile. The decline in earnings was chiefly attributable due to negative changes in the Bitcoin digital currency price in the first-quarter. Revenues slightly missed, by $5.3M, and came in at $111.1M. Seeking Alpha Strategy suffered in the first-quarter from a correction in the Bitcoin price which led to a $5.9B impairment shown as part of the company's operating expenses. It should be noted that this is an unrealized fair value loss that is the result of Strategy switching to fair value accounting in Q1'25. However, since Strategy said that it wants to be a long term holder of Bitcoin, it is unlikely that the company will ultimately recognize a loss on its Bitcoin holdings. Strategy Strategy has aggressively escalated its strategy of purchasing Bitcoin through the issuance of convertible debt as well as shares in the last several years: this year alone, the company acquired 132,780 Bitcoins -- in the period from January 1, 2025 through to May 26, 2025 and Strategy now owns almost 3% of the outstanding supply of all Bitcoins. MicroStrategy The company has said that it plans to conduct more debt-financed Bitcoin acquisitions this year as well as in the years ahead. The recent purchases have been financed by a combination of at-the-market share offerings, including preferred stock. The most recent batch of 4,020 Bitcoins was funded by $427M in combined capital raises and allowed the company to bring its total BTC holdings to a massive 580,250 valued at $60.4B. Strategy Strategy also raised its overall debt levels, mostly through the issuance of convertible debt, in the last 3 years in order to finance additional Bitcoin investments. As of the end of the first-quarter, Strategy was a significantly more leveraged Bitcoin bet than in the year-earlier period. In Q1'25, Strategy's book value surged to $32.2B while its long-term debt increased by about $1.0B Q/Q to $8.1B. Data by YCharts Strategy’s valuation I was very concerned about Strategy’s implied Bitcoin premium in my last work on the business intelligence company, especially considering that Strategy's underlying software business is really not that impressive. Shares of Strategy still trade at a considerable premium to book value (as well as the implied Bitcoin price), however: investors currently pay 3.2X the company's underlying GAAP book value (which is $121 per-share), but the firm has been massively more expensive in the past, especially during periods of surging investor optimism about the prospect for digital currency price appreciation... which tended to coincide with period of Bitcoin making new highs. This hype has died down a little bit lately, but shares of Strategy are clearly no bargain either, especially not for investors that have other routes to buy into the world's number one digital currency. The 3-year average P/B ratio for Strategy is 8.5X, so shares today are significantly cheaper, on a book value basis, than in the past which is the main reason why I am adjusting my rating for the corporate Bitcoin investor to hold. Data by YCharts Investors that look for direct exposure to Bitcoin can either buy the digital currency directly or gain BTC exposure through a vehicle like the Grayscale Bitcoin Trust ETF ( GBTC ). The Grayscale Bitcoin Trust ETF is one of the largest of its kind and was the first spot Bitcoin exchange-traded product available to public investors. Today, the Grayscale Bitcoin Trust ETF owns about 185,682 Bitcoins worth approximately $19.4B. Risks with Strategy The biggest risk for Strategy is obviously that the company is running a highly-leveraged Bitcoin investment strategy that could inflict serious mark-to-market losses in case the Bitcoin price unexpectedly tanks. This could drastically skew the company’s earnings results, but would not necessarily affect Strategy’s cash flow as the company has said it plans to be a long term owner of the world’s largest digital currency. What would change my rating on Strategy is if the difference to book value and market price narrowed in which case I may upgrade shares to buy. Final thoughts Strategy is still very highly valued with a price-to-book ratio above 3.0X and investors therefore continue to pay an high premium to the company’s implied Bitcoin holdings. Strategy continued to buy back thousands more Bitcoins since it released its first-quarter earnings, but the company has also seen a significant increase in its leverage profile as a result. While I believe that shares of Strategy are not yet competitively priced, I believe the risk profile has improved lately as the Bitcoin price has seen a massive recovery and even touched on new highs briefly.
