MicroStrategy (NASDAQ:MSTR) Rides Bitcoin Boom as Preferreds Reveal Yield Dislocations

Bitcoin Holdings Dominate MicroStrategy (NASDAQ:MSTR) Valuation

MicroStrategy (NASDAQ:MSTR) has transformed into a Bitcoin treasury juggernaut, now holding 597,325 BTC with an average purchase price of $70,982. At a Bitcoin market price near $110,000, this amounts to a portfolio worth $65.64 billion. Despite this staggering sum, MSTR stock is trading around $403, reflecting a market capitalization of $114.4 billion—an eye-watering 74% premium above the value of its BTC holdings. Bitcoin now accounts for approximately 57.4% of MicroStrategy's total market valuation, highlighting just how intertwined the company’s fate has become with the digital asset.

This leverage-driven Bitcoin accumulation strategy has made MSTR outperform both the S&P 500 and Bitcoin ETFs like BITO in recent years. While this relationship has rewarded shareholders during Bitcoin rallies, it leaves MicroStrategy highly exposed to volatility in crypto markets. Its ability to issue equity and preferred shares, including the recent $1B raise through STRD, amplifies both its upside and downside.

Insider Activity Signals Sentiment Shift for NASDAQ:MSTR

Unusual insider buying of preferred shares in Q2 2025 has attracted significant attention. Over $2.3 million in preferred share purchases were made by insiders like Patten Jarrod and EVP Shao Wei-Ming—an abrupt departure from the trend of heavy insider selling seen in both MSTR and the broader market. These purchases, disclosed in early June, included a 5,000-share buy at $85 ($425K) and another worth $300K. This could indicate growing insider confidence, particularly in the safety of STRD’s 10% yield—even if it is non-cumulative and junior in structure.

Full insider transaction history is available here.

MSTR's Preferred Shares: STRK Overvalued vs STRD, STRF

MSTR's preferred stack consists of:

• STRK: 8% yield, convertible into 1/10 of MSTR share, currently priced at $118, CY of 6.73%.

• STRF: 10% yield, traditional preferred, priced at $111.02, CY of 9.01%.

• STRD: 10% yield, junior, non-cumulative, priced at $89.85, CY of 11.11%.

Valuation models stripping the embedded option from STRK—which gives exposure to MSTR if the stock crosses $1,190—show its current premium is unjustified. The 20-year call option embedded is worth approximately $220, which, once adjusted, implies an "option-stripped" current yield of 7.65%. At 40% implied volatility, STRK still trades expensive versus STRF and STRD.

Pair trade strategies are emerging:

• Bearish on MSTR: Long STRF/STRD, short STRK.

• Neutral: Long STRF/STRD + long MSTR call option.

• Bullish: STRF/STRD + 1/10th MSTR call replicates STRK at a better yield.

This arbitrage window exists because STRK’s option value does not compensate for its lower base yield and seniority.

Capital Structure Highlights MSTR's Bitcoin-Driven Leverage

MicroStrategy’s capital stack as of Q1 2025 includes:

• $8.2B in long-term debt (up from $2.2B at end of 2023)

• $2.7B in preferred equity, including $1B from STRD IPO

• $32.2B in common equity

MSTR’s business model relies heavily on issuing equity and preferreds to fund Bitcoin acquisitions. This creates massive torque to Bitcoin’s price action—upside and downside. The premium over Bitcoin NAV also enables the firm to issue at attractive valuations.

STRD Credit Risk and Non-Cumulative Yield Raise Red Flags

While STRD’s 10% yield looks attractive, it’s priced for risk. STRD trades at $87.40, with a CY of 11.44%, reflecting market doubt around dividend consistency. Unlike STRK and STRF, STRD dividends are:

• Non-cumulative

• Not convertible

• Junior in capital stack

STRD will only pay dividends if declared by the board and out of legally available funds. With MicroStrategy operating at net losses and unstable operating cash flow, there’s a real possibility of STRD missing its first dividend.

In Q1 2025 alone, capital expenditures rose to $8.7M, up from $1.1M in mid-2024. Operating cash flow in recent quarters has been consistently negative, ranging from -$23.3M to -$2.4M. The company must either sell Bitcoin or tap more equity/preferred issuance to cover distributions.

Earnings Outlook for NASDAQ:MSTR Remains Cautious

MSTR has reported negative earnings in 7 of the last 10 quarters. Analysts expect continued pressure through 2026. While Bitcoin appreciation boosts asset value, real earnings remain volatile.

The firm owes $268.2M annually in preferred dividends—$150.6M to STRF and STRK (cumulative) and $117.6M to STRD (non-cumulative). Any shortfall in earnings must be covered by Bitcoin sales or new issuance.

If the company fails to pay STRD dividends promptly, confidence in its capital structure and BTC strategy could falter—especially since MicroStrategy markets itself as a Bitcoin powerhouse.

Valuation and Leverage: Premium Must Be Justified by BTC Rally

MicroStrategy’s share price now trades at more than 3.55x book value. While some premium is justified—thanks to BTC leverage, ability to raise capital, and modest software revenue—much of the valuation rests on future Bitcoin appreciation.

If BTC consolidates or declines, MSTR risks underperforming due to high debt service, preferred obligations, and a fragile earnings profile. On the other hand, as long as BTC rallies, MSTR acts like a super-leveraged Bitcoin ETF—with additional upside from NAV premium and capital market access.

Verdict on NASDAQ:MSTR Stock: HOLD

NASDAQ:MSTR is a leveraged Bitcoin bet wrapped in enterprise software. At $403, the stock bakes in Bitcoin optimism, premium NAV exposure, and preferred capital flexibility. But STRK looks overpriced versus STRD and STRF, and STRD’s high yield is a red flag wrapped in non-cumulative uncertainty.

Given the current Bitcoin surge and positive insider signals, the stock earns a HOLD rating. Traders might consider the STRF/STRK pair trade. Long-term investors should be cautious of downside torque from earnings instability, STRD risk, and leverage overload.

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