Bitcoin Price Drop Threatens Strategy Shareholders

Strategy, a prominent player in the cryptocurrency market, has been facing scrutiny due to its exposure to fluctuations in Bitcoin prices. The company's management claims that it can maintain financial stability even if the price of Bitcoin drops to $8,000. However, an analysis of the company's balance sheet reveals that this assertion may not hold true for ordinary shareholders.

With a total liability of $16.672 billion, consisting of debt and preferred shares, Strategy's common shares are at risk in case of a potential bankruptcy. The company is required to pay approximately $896 million annually in interest and dividends, aside from other expenses.

The value of the company's assets, including 717,722 Bitcoin and $2.25 billion in cash, would be insufficient to cover its liabilities if the Bitcoin price were to fall below a certain threshold. According to calculations, this threshold is around $20,094, which is significantly higher than the $8,000 mentioned by Michael Saylor.

Shareholders' claims to the company's treasury are purely theoretical and do not provide any direct repurchase or ownership rights. As a result, declines in Bitcoin price directly impact both the balance sheet size and the hypothetical value of MSTR shares.