Strategy Scoops Up More Bitcoin: Here’s the Redline It Can’t Cross

The world’s largest corporate bitcoin owner keeps digging deep to buy more. Strategy (MSTR), formerly known as MicroStrategy, acquired another 2,486 bitcoin for $168.4 million.

The mid-February investment takes the company’s total holdings to 717,131 bitcoin… and its losses on that stake to about $5.7 billion, assuming a price of bitcoin at $68,000.

Is Strategy Executive Chairman Michael Saylor worried? He certainly doesn’t seem to be, even though Strategy stock has plunged further and faster than bitcoin as the latter fell from an all-time high of more than $126,000 to less than $70,000. (Here’s why Strategy dropped so fast.)

Saylor continues to pursue the “digital asset treasury” approach he introduced to Strategy in August 2020, when he purchased $250 million worth of bitcoin for the company.

It was an era when bitcoin and many other assets were riding high on the Federal Reserve’s near-zero interest-rate policy.

Since then, Saylor has ramped up the bitcoin buys. To do so, he’s issued convertible debt, preferred stock, and common stock to raise the money needed to keep going.

Like an investor taking on a margin loan, Strategy’s approach magnifies the returns for common stockholders if Saylor is right and bitcoin keeps booming… going up and to the right.

If he’s not, the flameout could be spectacular.

In either case, Strategy’s strategy ensures, more or less, that its stock will be even more volatile than bitcoin itself. That’s a tall order for a security whose fluctuations are legendary already. (This setup makes Strategy a higher-risk, higher-reward way to play a bitcoin rebound.)

It’s also important to understand that Strategy effectively generates no operating profit, so to keep funding its bitcoin binge, it must regularly tap the capital markets.

This approach also means that Strategy must walk a careful line as it manages its finances.

Strategy Keeps Issuing Debt to Fund Its Bitcoin Purchases

Borrowing to buy more bitcoin may sound barmy, but there’s a method to the madness here. In short, Saylor aims to issue mispriced Strategy securities and buy relatively underpriced bitcoin.

There are two parts to this gambit:

1. Issue credit securities, including convertible debt and preferred stock
2. Issue common stock

The proceeds from these security sales are then used to buy bitcoin.

Strategy has a standing at-the-market (“ATM”) offering program that allows it to sell preferred and common stock whenever it thinks that market is attractive. So, it can simply sell those new shares into the market and then take the cash proceeds to buy bitcoin.

This ATM setup lets Strategy quickly move to take advantage of an attractive market rather than deal with the much slower process of raising capital through a secondary offering.

Here’s how it worked in the company’s latest transaction. During the period of February 9-16, 2026, Strategy raised funds of $169 million by selling:

• 785,354 shares of STRC stock, its variable-rate Series A Stretch preferreds, for net proceeds of $78.4 million

• 660,000 shares of its common stock, for net proceeds of $90.5 million

Then, using those funds, it bought 2,486 bitcoin over the same period for $168.4 million, at an average price of $67,710.

With that purchase, Strategy acquired its full bitcoin stake for $54.52 billion, or $76,027 per coin.

Strategy has billions more in preferred and common securities it can issue, too.

Add ’em all up, and Strategy can raise more than $37 billion that it can plow back into bitcoin.

Of course, investors must want to buy those securities, too. But the high coupons on the preferreds are a strong enticement for those looking to generate income. The wide range of issuable securities allows Strategy to use the ones that it finds more attractively priced.

However, in its last four weekly issuances, Strategy has sold about $543 million in common stock and just $85 million in preferreds. But with the common stock at a relatively low price now, about $130 compared to more than $400 as recently as August, it may not be such an advantageous time to rely so heavily on it. Sales of stock also put downward pressure on the price.

So, management has said that it intends to rely more on preferreds to fund its bitcoin buys.

By reducing its reliance on issuing common stock, it can help boost the common stock’s returns. But the move comes at a cost: It will have to pony up more to pay the dividends on the preferreds. In contrast, it doesn’t need to pay anything on the common stock.

However, issuing more common stock at current prices lowers their potential future return, compared to financing with the preferreds.

Here’s What Strategy Needs to Watch Out For

Strategy is running some significant risks in how it’s decided to finance its bitcoin investments.

When bitcoin was rising, Strategy’s common stock was valued at much more than the worth of its bitcoin holdings. It could sometimes trade at 160% of the value of its holdings. So, it made sense to issue common stock and turn around and buy more bitcoin with it. And that’s exactly what Strategy did.

That’s what traders call arbitrage… a low-risk or even risk-free profit. The move helped push the stock up even more.

But for now, those days are gone, as bitcoin has plummeted from more than $126,000 to less than $70,000 currently.

Strategy now trades at just 118% of the net asset value of its bitcoin holdings. The company keeps that figure prominently displayed on its website because it’s so important. At that ratio, it’s much less advantageous to issue the common stock and play the arbitrage game with bitcoin.

Strategy has turned heavily to convertible bonds and preferred stock to finance its buys, and it has more than $8 billion of each outstanding. But the company hasn’t generated any operating cash flow in the past two years, and analysts don’t expect it to do so in the future, either.

So, to pay the dividends on the various preferred stocks, with about $8.5 billion outstanding, Strategy needs cash and ready access to more cash in time. As a rough ballpark based on the preferreds’ coupons, Strategy could easily need $800 million annually to pay the dividends.

The company is sitting on about $2 billion in cash now, which aligns with Saylor’s statement that the company has two and a half years to cover dividends and debt without needing to raise capital.

But if the capital markets are not receptive then, bitcoin remains down, and Strategy still needs the cash, it may face some hard choices.

Those choices could include even selling some bitcoin, a move that could ultimately cause an unwinding of Strategy’s positions. The market may “squeeze” a company that’s in trouble.

So, it’s important that Strategy carefully manages its financing today.

Every new issuance of preferreds now raises the stakes later on. If Strategy gets into a position where it’s issuing preferreds to pay dividends on existing preferreds (rather than buy bitcoin), things could turn south quickly. That’s a redline that it just shouldn’t cross.

It wouldn’t likely be pretty for bitcoin traders, either. A forced liquidation of bitcoin would put significant pressure on the market, generating even more of the volatility the coin is known for.

Strategy is likely to be one of the market’s most interesting stories over the next couple of years. Be sure to keep watching!

Regards,

James Royal

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