MSTR Soars 15.8% on Friday, But Leverage in Balance Sheet Complicates Valuation

Strategy (MSTR) shares surged 15.8% on Friday, outperforming Bitcoin's 6.35% gain.

The stock traded at $153.09 by 3:15 p.m. ET, with a volume of 36.4 million shares, more than double its three-month average.

This rally was largely driven by the company's capital structure, which includes convertible debt and preferred stock that rank ahead of common equity in terms of claims on company assets.

In particular, Strategy has $6.7 billion of convertible debt and $15.5 billion of aggregate preferred-stock notional outstanding, which carry interest, dividend, or liquidation claims.

As a result, investors should not simply subtract the stock's market value from the gross Bitcoin holdings to get an accurate picture of net assets available to common shareholders.