Strategy, the company that has repositioned itself as a major Bitcoin investment vehicle, announced a $2 billion share buyback program. This move comes as its stock has significantly underperformed Bitcoin since late October, with Bitcoin up 22% and Strategy only 9% in 2025, a substantial "tracking error." The company's stock premium to its net asset value has shrunk from over three times in November to approximately 1.4 times, indicating growing market unease surrounding its strategy.
The firm's operational model relies heavily on issuing new common shares to fund Bitcoin purchases and dividend payments on preferred stock, leading to concerns about shareholder dilution. This approach, which has been dubbed "dilution-as-a-strategy," has subordinated ordinary shareholders, who rank behind $8.2 billion of convertible bondholders and $6.6 billion of preferred stockholders in a liquidation scenario. The latest buyback is an attempt to address this issue and stabilize the common stock value.
Strategy's recent financial disclosures reveal that a significant portion of funds raised from stock sales has been allocated to dividend payments rather than Bitcoin acquisitions. For instance, a recent $128.1 million raise saw $106 million go to preferred stock dividends, not Bitcoin. The company has also established a $1.44 billion U.S. dollar reserve to fund these dividends for the next two years, an action that signals a shift from its aggressive Bitcoin accumulation strategy in favor of financial stability. The company's unique structure, which generates little operational cash flow from its legacy software business, makes it dependent on constant capital raises to meet its obligations and acquire more Bitcoin.
Analysts have highlighted the market's negative reaction to Strategy raising funds from common stockholders primarily to pay preferred stockholder dividends. The company's stock has fallen almost 41% this year, and about 70% from its November 2024 peak, dramatically lagging Bitcoin. The buyback is an effort to regain investor trust and demonstrate value beyond simply holding Bitcoin, as the market questions the long-term viability of a model fueled by continuous dilution and the ability of Michael Saylor to untether the common stock from this drag.
Despite the concerns, Strategy recently acquired an additional 520 BTC for approximately $34.9 million at an average price of $67,068 per bitcoin, bringing its total holdings to 847,363 BTC. These acquisitions were funded by at-the-market sales of its Class A common stock. Benchmark analysts defend Strategy, noting a $1 billion cash reserve in place to fund dividend payments before any meaningful Bitcoin sale would be necessary, countering narratives of an impending "death spiral."
