Strategy Survives Summer of Criticism as Bitcoin Rebounds

Michael Saylor's Strategy has survived its 'death-spiral' summer, thanks to a sharp rebound in Bitcoin. In June, critics were quick to draw comparisons between Strategy and the doomed Terra ecosystem, arguing that its financial engineering was headed for a similar collapse. However, the picture looks considerably different now. The company's MSTR shares gained roughly 30% in August, outpacing Bitcoin's roughly 24% monthly rise.

Strategy's basic idea is to raise dollars by issuing common stock, convertible debt, and preferred securities, then use that capital to buy Bitcoin. When MSTR trades at a sufficiently large premium to the value of its Bitcoin holdings, selling new shares can theoretically increase the amount of Bitcoin attributable to each existing share.

In June, Strategy's STRC preferred stock plunged to $71.25, making it more expensive for the company to fund its leveraged Bitcoin play. However, as of Monday's close, STRC had recovered to $97.10, considerably closer to its intended range.