Key Takeaways
Strategy's $15 billion preferred stock pile carries $1.5 billion in annual dividend obligations, and the company's decision to burn through its cash buffer has left it with few options beyond selling Bitcoin, according to Arca Chief Investment Officer Jeff Dorman.
The situation has "gotten out of hand," Dorman said in an X post on May 28, referring to the roughly $15 billion in preferred shares — STRK, STRF, STRD, STRC and STRE — that Strategy issued to fund its Bitcoin accumulation. Each carries fixed dividend terms with varying seniority and risk exposure across the capital structure.
"The model was built on the assumption that BTC was about to moon," Dorman said. Strategy raised $2 billion in cash through equity issuance earlier this year, which bought the company roughly 18 months of runway to cover its dividend payments. But rather than hold that buffer, the company used the cash to repurchase its 2029 maturity bonds at a discount — a move Dorman called "baffling."
"Why pay off 0% coupon debt with the only cash you have?" he said.
Strategy now holds 843,738 Bitcoin, purchased at an aggregate cost of $63.87 billion and an average price of approximately $75,700 per coin, according to company disclosures. Bitcoin traded at $73,737 as of May 29, roughly 16% lower year-to-date, putting the company's entire treasury position underwater.
CEO Phong Le confirmed on May 28 that the company would consider selling Bitcoin to manage its obligations. "We'll likely sell Bitcoin at some point in time, but we will be net increasing our Bitcoin and more importantly, increasing our Bitcoin per share," Le said in a CNBC Fox Business exclusive.
The admission marked a sharp departure from the "never sell" doctrine that executive chairman Michael Saylor had maintained since the company began accumulating Bitcoin in August 2020. The sole historical exception was a December 2022 sale of 704 BTC at roughly $16,775 for tax-loss harvesting purposes.
Polymarket traders now assign a 90% probability that Strategy will sell some Bitcoin before Dec. 31, 2026, with $32.4 million in cumulative volume traded on the contract. The market shows a 71% chance by June 30 and an 18% chance by May 31, reflecting expectations that a near-term sale is possible but not imminent.
Dorman outlined two possible outcomes: sell Bitcoin to pay the preferred dividends, or stop paying the dividend entirely. Either path carries asymmetric consequences for Strategy's common shareholders, its preferred investors and Bitcoin's price trajectory. If the company is forced to sell during a downturn, it risks pushing both Bitcoin and MSTR shares lower simultaneously.
Strategy reported a net loss of $12.54 billion in Q1 2026, driven primarily by unrealized mark-to-market losses on its Bitcoin holdings under ASU 2023-08 accounting standards. The company's software business generated $124.3 million in revenue, a fraction of the capital at stake in its treasury operations.
MSTR shares fell more than 4% in the session following the May 5 earnings call, where executives first acknowledged the possibility of a sale. The stock has historically traded at a premium to net asset value based on investor trust in the permanent holding pledge — a premium that now faces reassessment.
The next inflection point is Strategy's Q2 2026 earnings report, expected in early August, which will reveal whether any Bitcoin was sold during the quarter. If Bitcoin reclaims $90,000, the dividend-coverage pressure eases and the probability of a sale may decline. A sustained move below $70,000 could accelerate the timeline.
This article is for informational purposes only and does not constitute investment advice.
