Strategy Stock Crashes 7% as Bitcoin Sale Triggers Investor Panic, June 06

Strategy Inc. shares fell 7% on Friday to $120.44, marking the stock’s worst week since November 2022. The decline follows the company’s sale of 32 Bitcoins for $2.5 million between May 26 and May 31 to fund preferred stock dividends. The move broke Strategy’s long-standing “never sell Bitcoin” philosophy and rattled investors who had bet on the company’s unwavering accumulation strategy.

Why Strategy Sold Bitcoin

Strategy sold 32 Bitcoins to pay dividends on its preferred stock STRC, which offers an 11.5% annualized yield. The company’s traditional software business cannot cover the interest payments on its preferred shares. Strategy also sold 801,994 shares for $128.3 million under its at-the-market program during the same week, raising cash for structural obligations.

The Preferred Stock Problem

STRC, Strategy’s $10 billion preferred stock offering, fell 5.3% below its $100 par value on June 3 to $94.70. The drop erased five months of dividend income in a single trading session. STRC depends on trading near par to function as a capital-raising tool for Bitcoin purchases. If STRC loses its peg, Strategy’s ability to fund future Bitcoin acquisitions weakens significantly.

Options Traders Turn Bearish

Put options on Strategy stock surged to three times the daily average volume on Friday. More than twice as many puts traded versus calls, with $250 million of the $335 million in premium tied to puts. The YieldMax Short MSTR Option Strategy ETF (WNTR), which shorts Strategy stock, gained 30% since May 11. This shift signals traders expect further downside pressure on the stock.

What This Means for Investors

Meyka rates MSTR a C+ with a sell recommendation, citing weak fundamentals across profitability, growth, and valuation metrics. The stock trades at 0.87 times book value and carries a negative earnings yield. With the RSI at 28.6 (oversold) and the stock down 67% over the past year, analysts remain divided, though 18 rate it a buy against just 1 sell rating. The Bitcoin sale has raised questions about whether Saylor will liquidate more holdings to cover rising dividend costs.

Final Thoughts

Strategy’s Bitcoin sale shattered investor confidence in its buy-only strategy and exposed cracks in its preferred stock funding model. The stock’s 7% drop Friday and worst week since 2022 reflect growing concern that rising dividend costs could force more liquidations ahead.

FAQs

Disclaimer:

The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.