The Bold Claim: Survival at $8,000
Strategy, the firm led by Michael Saylor, has issued a bold assurance to investors: the company can survive a catastrophic drop in Bitcoin prices down to $8,000 and still honor its debts.
The company currently holds a massive treasury of 714,644 BTC. While its net debt stands at roughly $6 billion, Strategy argues that even at $8,000 per coin, its Bitcoin assets would still equal $6 billion—enough to cover what they owe. Furthermore, the company emphasized that these debts are not due immediately, with maturity dates spread between 2027 and 2032.+1
The Plan: Turning Debt into Shares
To manage this debt without selling its Bitcoin stash, Strategy plans to “equitize” its liabilities. This means they aim to convert their convertible debt into company stock rather than paying it back in cash or taking on new, senior loans.
The Skeptics: “Math vs. Reality”
Despite Strategy’s confidence, financial critics warn that the situation is far more dangerous than the company admits.
- Massive Paper Losses: Critics note that Strategy paid an average of $76,000 per Bitcoin. A drop to $8,000 would result in a staggering $48 billion loss on paper, making the company look toxic to traditional lenders.
- Cash Flow Issues: The company’s actual software business generates only about $500 million annually. Skeptics argue this is nowhere near enough to service the interest and dividends required by their billions in bonds and preferred shares.
The Danger for Retail Investors
Experts like Anton Golub suggest the “equitizing” plan is actually a trap for retail shareholders.
The majority of Strategy’s debt is held by Wall Street hedge funds. Because Strategy’s stock price has dropped significantly (making conversion to stock less profitable), these funds will likely demand cash repayment when bonds mature. To raise that cash, Strategy would have to print and sell massive amounts of new stock. This would severely dilute existing shareholders, effectively dumping the financial risk onto retail investors while hedge funds walk away with their profits.
Coindesk
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