Crypto gambler raises stakes (again)

MicroStrategy (NASDAQ: MSTR) kicked off 2025 with what might be the most audacious financial engineering scheme in corporate history. In a January 3 announcement that stretched the boundaries of financial credulity, Michael Saylor and friends revealed plans to raise up to $2 billion through preferred stock offerings, the latest step in what it arrogantly calls its ’21/21 Plan,’ an almost unthinkable scheme to raise $42 billion over three years to buy (even more) BTC.

The numbers and scale are so large that they almost seem unreal.

A company that generated just $116.1 million in quarterly revenue—down 10.3% year-over-year—now plans to raise more capital than many Fortune 500 companies combined.

Let’s give this some perspective.

MicroStrategy’s latest capital raise alone is nearly 20 times its quarterly revenue, and from a firm whose core software business is withering while it transforms itself into what is undoubtedly the most leveraged BTC bet in corporate history.

As recently as November, MicroStrategy completed a $3 billion offering of zero-coupon convertible notes due 2029 at a 55% conversion premium while simultaneously deploying $2.03 billion to acquire 27,200 BTC at an average price of $74,463 per BTC.

But here’s the real kicker: Saylor has been in such a hurry to accumulate BTC that he’s already exhausted most of its previous at-the-market equity offering.

MicroStrategy’s chairman (and chief architect of this so-called ‘strategy’), loves to talk about ‘intelligent leverage’ and ‘engineering a better world.’ But strip away the rhetoric and salesmanship for a moment, and what emerges is little more than a dangerous game of financial musical chairs, with shareholders’ capital ultimately at stake.

The inherently circular strategy would be almost amusing if it weren’t so dangerous.

The company issues equity and zero-coupon convertible notes to buy BTC, hoping the underlying price rises enough to justify issuing even more equity and debt to buy more.

Now, credit where credit is due, this feedback loop has worked magnificently to date in a bull market, powering MicroStrategy’s stock to a stunning 650% gain year-to-date, far outpacing BTCs 180% rise.

But that divergence should be setting alarm bells.

The company’s fully diluted market cap has ballooned to approximately $106 billion, far exceeding its BTC holdings’ market value of $31.2 billion. Even after accounting for $4.2 billion in debt, this premium appears wildly excessive for a company whose software business is declining.

And let’s not forget about the creation of leveraged exchange-traded funds (ETFs) tied to MicroStrategy’s stock, a factor that has added rocket fuel to the speculative fire. These instruments (which now represent nearly 9% of the company’s market cap) offer leveraged exposure to MicroStrategy’s already leveraged BTC bet.

It’s a bubble within a bubble.

MicroStrategy is justifying this insanity with its own performance metric dubbed ‘BTC yield,’ which it unsurprisingly continues to massively succeed on. But here’s the problem: the metric rather conveniently ignores the accumulated massive debt burden, instead assuming that all convertible notes will be converted to equity rather than requiring cash repayment.

That’s frankly absurd.

In fact, it’s so problematic that MicroStrategy spends multiple pages warning investors about the limitations of ‘BTC yield,’ notably that it ‘does not take into account debt and other liabilities and claims on company assets that would be senior to common equity.’

Yikes.

The true precariousness of this strategy becomes clear when considering a severe market downturn.

According to Saxo Bank analysis, a 50% BTC correction—not unprecedented in crypto markets—would slash MicroStrategy’s holdings from $31.2 billion to $15.6 billion, triggering massive impairment charges. Given the company’s leveraged exposure, such a correction could result in a catastrophic 60-80% decline in its stock price.

The company’s latest preferred stock gambit adds another layer of complexity to an already Byzantine capital structure. These perpetual preferred shares, with their convertibility features and dividend obligations, represent another potential claim on company assets that could come back to haunt shareholders in a downturn.

And remember, this is just the beginning. MicroStrategy plans to raise another $21 billion through fixed-income instruments as part of its 21/21 Plan.

Consider the convertible notes issued with zero or near-zero coupons. These instruments assume BTC’s price will rise enough to make conversion attractive. If it doesn’t, MicroStrategy could face massive cash obligations when these notes mature—obligations that could force BTC liquidations at precisely the wrong time.

What’s particularly alarming is the speed at which MicroStrategy accumulates both BTC and financial obligations. Having already deployed most of its previous at-market equity offering, it’s now embarking on an even more ambitious $21 billion program.

This rapid pace suggests a company racing against time, perhaps betting that current market conditions represent a fleeting opportunity that must be seized regardless of risk.

The harsh reality is that MicroStrategy has transformed itself from a struggling software company into what might be the most sophisticated gambling operation in corporate America.

Saylor speaks of ‘engineering a better world,’ but the truth is that he’s engineering something far more dangerous—a highly leveraged bet that could implode if BTC’s price doesn’t cooperate or market conditions turn hostile.

Investors seduced by MicroStrategy’s year-to-date returns would do well to remember that financial engineering, no matter how sophisticated, cannot eliminate fundamental risk; it can only transform and amplify it.

Ultimately, the question isn’t whether BTC or ‘crypto’ will succeed over the long term; it’s whether MicroStrategy’s increasingly precarious financial structure can survive long enough to find out.

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