Arca chief investment officer Jeff Dorman says Strategy Inc., the company behind MSTR, has finally pushed its Bitcoin funding machine too far. He wrote that the “MSTR situation has gotten out of hand,” estimating that Strategy now has about $15 billion in preferred stock that requires roughly $1.5 billion in annual dividends. He argued that this level of fixed payouts only works as long as markets stay strong and liquidity remains easy.
Dorman noted that Strategy recently sold roughly 2 billion dollars of new equity to raise cash and calm fears about near‑term default risk on those preferred obligations. He said that the move effectively bought the company time by building a reserve equal to about two years of dividends. However, he questioned how management then chose to use that safety net once investors relaxed.
From Cash Cushion To 2029 Bond Buyback
Instead of keeping most of the fresh cash for payouts, Dorman said Strategy redirected the buffer into its 0 percent convertible notes due 2029. In mid-May, the company said it would repurchase 1.5 billion dollars of those bonds, then revealed it paid about 1.38 billion dollars, an 8 percent discount. The deal cut the 2029 stack from around 8.2 billion dollars to 6.7 billion dollars and left Strategy with roughly 871 million dollars in cash.
Dorman acknowledged that buying back deeply in-the-money convertibles can reduce future dilution for MSTR holders if the stock recovers. However, he argued that using scarce cash to buy a bond with no current interest is hard to defend, while preferred dividends keep piling up. He said that, by improving the look of its long‑term debt, the company may have weakened its ability to cover the costly preferred obligations it issued to buy more Bitcoin.
As a result, the Arca CIO said MSTR equity, Bitcoin, and preferred shareholders are now “really in a bind” together for the first time. He argued that every layer of the capital stack now depends even more directly on Bitcoin’s price and on the market’s willingness to keep funding Strategy’s complex structure.
He warned that “someone may lose badly within the next four months,” though he did not say whether common stock, converts, or preferreds face the greatest risk.
READ MORE: Robinhood Stock Price is Soaring: Is HOOD Turning the Tide?
