MSTR Stock Crash: Ripple CEO Slams Michael Saylor on BTC Purchase

Key Insights:

• Strategy’s capital structure came under pressure after MSTR stock fell 30% and STRC stock dropped 18% during the week.
• This has fueled speculation that Strategy could instead prioritize rebuilding cash reserves, repurchasing shares, or even selling part of its Bitcoin holdings.
• Investors are closely watching June 30, when STRC reaches its ex-dividend date and dividend rate reset.

Strategy’s two flagship securities, MSTR and STRC, posted steep weekly losses, increasing pressure on the company’s Bitcoin-backed financing model. MSTR ended the week down 30%, while STRC declined 18%, fueling market speculation over whether Strategy may need to adjust its capital allocation strategy if weak market conditions persist.

Strategy’s mNAV Falls Below Key Threshold

MSTR slipped another 3% on Friday, June 26, closing at $82.31. The decline pushed Strategy’s multiple to net asset value (mNAV) to 0.99, according to the company’s website.

That reading fell below the roughly 1.22 threshold management has previously identified as the level where issuing new MSTR shares to buy additional Bitcoin remains accretive on a per-share basis.

Strategy’s website also showed its multiple to net asset value (mNAV) had declined to 0.99. The latest mNAV reading is well below the approximately 1.22x level that Strategy’s management has previously identified as the minimum threshold at which issuing new MSTR shares to acquire additional Bitcoin remains accretive on a per share basis.

This means that Michael Saylor could be forced to pause any further selloff in the MSTR stock. Last week, the company sold a massive $335 million in MSTR shares to increase the USD reserve. This led to a strong panic on the Street, causing a 30% downside in just the last five trading sessions.

Previously, the Strategy management has cleared that if the mNAV drops under 1, they would undertake alternative capital allocation strategies. It includes selling a portion of its Bitcoin holdings, rebuilding cash reserves, or repurchasing MSTR shares.

Is MSTR Stock A Buying Opportunity?

Despite a brutal crash, market experts believe that MSTR stock has a strong room for recovery ahead. Crypto analyst Michael van de Poppe said that the company’s valuation currently stands at $29 billion. Thus, it’s trading at a steep discount in comparison to the $51 billion Bitcoin holdings.

This shows that the MSTR stock is now available at a discount of roughly 43% to the value of its underlying assets. Van de Poppe said he does not expect Strategy to fail despite the recent selloff. He believes that the stock could be approaching the end of correction.

Another expert, Fred Kruger said MSTR stock could outperform Bitcoin over the long term. According to Krueger, MSTR is trading at approximately 0.6 times the value of Strategy’s underlying Bitcoin holdings. Kruger said investors are now available at discounted exposure to BTC through MSTR.

The analyst argued that if Bitcoin appreciates tenfold over the coming years, the company’s debt and preferred securities would become relatively insignificant in comparison to the BTC Treasury.

He also noted that Bitcoin is currently trading at roughly 0.45 times its power law valuation. It suggests a potential 10x upside over the next five years.

Based on his estimates, Krueger said a $1 million investment in Bitcoin could grow to roughly $10 million over a decade. The same investment in MSTR would provide exposure to approximately $1.6 million worth of Bitcoin. And it could potentially grow to $16 million.

Thus, as per Kruger’s calculations, the MSTR stock could outperform BTC by nearly 50% over the next decade.

STRC Stock Investors Eye June 20 Dividend Deadline

Along with MSTR, Strategy’s STRC stock has also been on a freefall, ending the week 18% down at $74.57. Investors are now staring at the June 30 dividend date.

Shareholders who own the STRC stock before June 30 will qualify for the company’s first semi-monthly dividend payment of $0.48 per share, scheduled for July 15. Analysts noted that while stocks typically decline by the value of the dividend when trading ex dividend, STRC’s $0.48 payment represents less than 0.7% of its current share price.

Another major concern is the rise in dividend obligations for Strategy, as STRC price collapsed. As per the stock’s one month volume weighted average price (VWAP) of $91.46 and its recent trading price near $73, the preferred stock’s effective yield has risen to approximately 15%. IT shows that investors are demanding a substantially higher return than the existing 11.5% dividend.

Market participants now expect Strategy to raise the dividend rate to at least 12% or 12.5% during the upcoming reset. Speaking on this, Peter Schiff wrote:

On numerous occasions, Saylor assured risk-averse investors that STRC took the volatility out of Bitcoin. That they could get an 11.5% yield based on Bitcoin credit without assuming the volatility of Bitcoin itself. Over the past month Bitcoin is down 22% while STRC is down 28%.

Ripple CEO Slams Michael Saylor Over Bitcoin Purchases

Ripple CEO Brad Garlinghouse questioned the long-term sustainability of Strategy’s Bitcoin acquisition strategy. He criticized the financial modeling as set up by Executive Chairman Michael Saylor.

Speaking in an interview with CNBC, Garlinghouse raised concerns over Strategy’s continued reliance on preferred stock offerings, including STRC, to fund additional Bitcoin purchases.

“Financial engineering does not drive long-term value … long-term value of any digital asset is going to be driven by utility,” the Ripple CEO said.

Garlinghouse questioned whether the company’s capital raising approach can continue delivering long-term value to investors.

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