Risks to Strategy’s business model

Strategy’s business model has been extremely effective over the long term, increasing the company’s value 13-fold since 2020. However, it is obviously heavily influenced by the value of bitcoin. 

The model depends on the stock trading above NAV. If the value falls, Strategy’s premium ceases to exist. Yet its fixed debt obligations are still payable. Furthermore, issuing new shares dilutes existing shareholders while also producing a negative bitcoin yield, making it significantly harder to raise capital regardless of the funding strategy.

Above all, investors must be bitcoin bulls.

Financing Engineering

Strategy and its various equity and bond offerings present multiple ways for investors to invest based on their own risk tolerance and return profiles. 

For example, some investors who believe in bitcoin may accept the higher risk of buying Strategy’s stock or low-yield convertible bonds to enjoy a higher upside. Others, like an insurance company, might prefer a more limited exposure to cryptocurrency but a higher fixed dividend. 

Strategy has historically purchased bitcoin when the capital raised is greater than the dilution of shares, the BTC per share increases, and each funding method brings in more value than it costs existing shareholders. 

The metric that gauges the financial engineering of Strategy is called the BTC Breakeven Annualized Rate of Return (ARR) – the minimum annual bitcoin growth needed to pay dividends without issuing new shares. This number is at 3% as of June 15, 2026. This means that bitcoin needs to grow at least 3% annually in order for Strategy to pay its obligations without selling bitcoin or issuing new stock. 

If bitcoin grows less than the BTC Breakeven ARR or stays stagnant, existing shareholders’ shares get diluted more than the bitcoin per share grows, and Strategy is forced to sell BTC or issue new shares or preferred stock to pay off their debt.