The financing dilemma of Strategy: mNAV approaching 1x, preferred stock dividend yield under pressure analysis

As of April 6, 2026, Strategy holds 766,970 bitcoins, with total acquisition costs of approximately $58.02B, and an average cost basis of $75,644 per coin. In the first quarter of 2026, the company recognized unrealized losses of up to $14.46 billion. This means that under current accounting standards, the carrying value of its digital assets has fallen significantly below the purchase cost, and the quality of the asset base is deteriorating.

From a financing perspective, the direct consequence of mark-to-market unrealized losses is that the credit foundation of the company’s balance sheet is weakened. Strategy’s financing capacity heavily depends on the market valuation of its bitcoin holdings. When the market value of its holdings continues to remain below its book cost, creditors and preferred equity investors will reassess the company’s margin of safety in debt repayment. More importantly, unrealized losses on the holdings compress the company’s bargaining power when issuing convertible bonds or preferred stock—investors’ confidence in “high-quality collateral assets” declines, and the risk premium they demand rises accordingly, further increasing financing costs.

mNAV premium compresses to near 1x—has the core support for capital expansion already broken down?

mNAV (Market Value to Net Asset Value) refers to the ratio between the company’s market capitalization and the value of its bitcoin holdings on its balance sheet. In essence, this metric measures the valuation premium that the market assigns to Strategy’s “bitcoin proxy” role. At the height of the cycle, MSTR’s trading price was far above the value of its held bitcoins, and mNAV at one point reached 2.4x or even higher—allowing the company to issue new shares at that premium, buy more bitcoins, and continuously repeat the cycle.

However, the current mNAV has compressed sharply from its peak. Some sources show it is approaching 1.14x, while other analyses indicate it has fallen into the range of about 1.03x to 1.04x. The market premium has nearly vanished, meaning Strategy can no longer raise capital in the market at prices significantly higher than net asset value. The fundamental reason for this change is that the market has started to view Strategy purely as a bitcoin holdings vehicle, and is no longer willing to pay an additional “strategic premium” for it. When mNAV approaches 1x, the arbitrage logic of accumulating bitcoins through equity financing has basically failed, and the company’s expansion engine is sputtering.

Preferred stock issuance accelerates—high fixed interest costs are eroding free cash flow

Against the backdrop of a tightening mNAV premium, Strategy has shifted materially toward preferred stock financing. To date, the company has issued multiple series of preferred stock, including STRK, STRF, STRD, and STRC, with dividend rates generally ranging from 8% to 11.5%. To maintain the issuance pace, the company has even been increasing the dividend rate; its annualized dividend rate is now as high as 11.5%.

These preferred shares come with stringent terms. For example, STRF has an annual dividend of 10%. If the dividend for the period cannot be paid, the unpaid portion will accumulate as compounding dividend interest, with the annual rate increasing by 1 percentage point each quarter from the original 10%, up to a maximum of 18%. In addition, if Strategy fails to declare a regular dividend, under certain conditions it must sell other shares to raise funds to pay the deferred preferred dividend; the unpaid regular dividend will accumulate as compounded dividends at an initial annual interest rate of 11%, potentially rising to a maximum annual rate of 18%.

These high fixed interest costs are continuously consuming the company’s free cash flow. Estimates suggest that MSTR faces roughly $1.1 billion per year in preferred stock dividends and debt payments, while free cash flow remains negative. With cash reserves of about $2.25 billion, it is enough to cover interest and dividends for more than two years; but with ongoing financing and cash constantly flowing out, the supportive window is narrowing.

Dissecting the financing structure of the “21/21 plan”—how long can the dual engines of common stock and preferred stock last?

In October 2024, Strategy unveiled the ambitious “21/21 plan,” aiming to raise $21 billion by issuing both common stock and fixed-income instruments, for a total of $42 billion, all earmarked for adding to bitcoin holdings and debt restructuring. Since then, the company has further expanded its capital plan, clarifying that it intends to issue $21 billion of common stock and $21 billion of STRC preferred stock.

The core logic of this plan is built on the premise that the mNAV premium remains positive. Common stock financing depends on market demand for MSTR shares, while preferred stock financing depends on investors’ appetite for high-coupon notes. However, the company is currently under dual pressure: on one hand, the mNAV premium is trending toward 1x, sharply shrinking the “arbitrage space” for common stock financing; on the other hand, the interest cost of preferred stock financing has risen into double digits, and the larger the issuance size, the heavier the fixed interest burden. This structure essentially uses higher financial leverage to offset the trend of leverage contraction; its sustainability depends on whether financing costs remain consistently below the expected return on bitcoin—which becomes increasingly unpredictable in an environment of heightened price volatility.

What structural changes result from switching financing tools after the convertible bond arbitrage window closes

During periods of easy financing, convertible bonds were an important tool for Strategy’s expansion. Investors bought convertible bonds and shorted MSTR stock to lock in arbitrage gains, and this “convertible bond arbitrage” strategy drove strong demand for the company’s bonds. However, as the MSTR premium narrows and even disappears, the arbitrage opportunity for convertibles is compressed significantly, and traditional financing routes have gradually been blocked.

The switch in financing tools brings three structural changes. First, financing costs rise significantly. Convertible bonds typically carry low coupons (some close to zero), while the fixed dividend rates on preferred stock are generally above 8%, creating higher demands for corporate cash management. Second, differences in payment rigidity. Convertible bonds do not impose mandatory interest payments before maturity, whereas preferred stock dividends (especially for cumulative preferred shares) create continuous cash outflow pressure. Third, the capital structure becomes more complex. Issuing multiple series of preferred stock adds layers to the capital structure; different tiers of preferred stock differ in dividend payment order, accumulation terms, and seniority of claim, which significantly increases overall financial management complexity.

Estimating the sustainable window of cash burn rate and cash reserves

To assess the continued viability of Strategy’s financing model, it is necessary to quantify the balance between its cash inflows and outflows.

On the cash inflow side, the company mainly raises funds by selling common and preferred stock through an “at-the-market” (ATM) program. In the week spanning late March to early April 2026, the company raised about $330 million through STRC preferred stock, and about $144 million through common stock, for a total of $474 million. However, whether this financing cadence can be sustained depends heavily on market sentiment and investors’ interest in preferred stock.

On the cash outflow side, preferred stock dividends and debt payments of roughly $1.1 billion per year create rigid expenses. Based on cash reserves of about $2.25 billion, and without considering new financing income, the reserves can cover only about two years of fixed interest outlays. If the bitcoin price continues to remain below the average cost basis, the company may need to sell stocks or preferred shares at lower prices to maintain operations—this would further raise financing costs and compress cash reserves.

Overall estimates suggest that, under the conditions of maintaining the current financing cadence and without a major rebound in the bitcoin price, Strategy’s cash reserve support period is roughly 12 to 18 months. If market sentiment deteriorates further and financing becomes more difficult, this window will narrow faster.

With bitcoin price and cost basis inverted, will it trigger forced liquidation or credit-rating downgrade risk?

As of April 8, 2026, Gate’s market data shows that the bitcoin price is around $71,000. Even at this price level, there is still a price gap of about 6.5% versus Strategy’s average cost basis of $75,644 per bitcoin, meaning its overall holdings remain in an unrealized loss position.

It needs to be made clear that Strategy is not currently facing a risk of forced liquidation. In the company’s debt structure, there are no loan products that use bitcoin as collateral with additional margin call provisions, so a decline in the bitcoin price would not directly trigger liquidation. However, persistent unrealized losses may still produce indirect effects through the following channels: credit rating agencies could downgrade the company’s rating, thereby increasing future financing costs; preferred stock investors could demand a higher dividend rate to compensate for risk; and in extreme cases, if the company fails to pay preferred dividends on time, interest rates could spike under cumulative dividend provisions, further intensifying financial pressure.

Summary

Strategy is at a critical juncture in transforming its financing model. The mNAV premium has compressed from 2.4x to near 1x, meaning the valuation buffer that supports its high-speed expansion has almost been exhausted. The issuance of high-coupon preferred stock may temporarily fill the financing gap, but the roughly $1.1 billion per year in fixed dividend expenses continues to consume limited cash reserves. Under the double pressure of bitcoin prices still below average cost basis and free cash flow remaining negative, whether its financing flywheel can keep running will face substantial tests over the next 12 to 18 months.

FAQ

Q1: What does an mNAV premium of zero mean for Strategy?

An mNAV premium of zero means the market is no longer paying a price for MSTR shares above the value of their bitcoin holdings. Strategy can no longer issue new shares at a premium to capture arbitrage gains, and its core business model of “financing to buy bitcoin at a premium” faces structural challenges.

Q2: Is the preferred stock dividend rate of 11.5% sustainable?

With ongoing financing needs, the company may be able to maintain this rate in the short term to attract investors. But in the long run, a fixed preferred dividend rate of 11.5% will significantly squeeze free cash flow. If the bitcoin price cannot rise to a level that covers this cost, continued cash outflows will accelerate the depletion of cash reserves.

Q3: Is Strategy facing bankruptcy or liquidation risk?

At present, there is no clear bankruptcy or forced liquidation risk. The company’s debt structure does not include any margin call provisions based on bitcoin collateral. The main risks are the shrinking financing window and accelerating cash consumption, rather than direct default or liquidation.