Main Points：
- Stalled Funding Strategy: Due to the risk that its Bitcoin purchase plan is running into funding limitations, Strategy’s aggressive acquisition of Bitcoin may soon hit a wall.
- Stock Downgrade: Investment bank Monness Crespi downgraded Strategy’s stock to “sell” just two weeks after initiating coverage, with analyst Gus Gala highlighting concerns over the company’s ability to finance further purchases.
- Massive Holdings and Heavy Buying: Strategy currently holds 528,185 BTC and has been buying large amounts almost every week using funds raised through common stock issuances and the sale of Series 1 preferred shares (STRK).
- Funding Challenges: Gala notes that raising funds through equity offerings is becoming increasingly difficult. Without shifting significantly to issuing fixed income securities, Strategy’s Bitcoin financing strategy will become more challenging.
- Price Target: The analyst set a target price of $220—a nearly 30% decline from the current level near $300—implying further downward pressure on Strategy’s shares.
1. Introduction: A Roadblock for an Aggressive Bitcoin Purchase Plan
Strategy’s bullish Bitcoin buying strategy, which has helped propel its stock price up by over 2,500% in the past five years, now faces a critical risk: the funding for further acquisitions may soon run out. Wall Street investment bank Monness Crespi has downgraded Strategy’s stock to “sell” due to concerns over its financing methods, which rely heavily on equity issuance.
2. Concerns Over Funding and Convertible Bonds
Analyst Gus Gala of Monness Crespi, who initiated coverage on Strategy just two weeks ago with a neutral rating, expressed growing skepticism regarding the company’s Bitcoin purchase plan. He noted that while initial optimism was present, the strategy’s reliance on issuing common stock and preferred stock (Series 1 STRK) is showing signs of strain. Gala believes that Strategy’s plan may soon reach a bottleneck due to limited funding avenues.
3. Massive Bitcoin Holdings and Aggressive Buying
Currently, Strategy holds an impressive 528,185 BTC. Over the past several months, the company has consistently increased its holdings through large-scale purchases financed by issuing common stock and by selling Series 1 preferred shares. However, according to analyst Gala, these financing methods may soon be insufficient. He warned that unless the company shifts more toward issuing fixed income securities, its Bitcoin financing strategy could falter.
4. Funding Usage and Future Challenges
Gala pointed out that of the $21 billion raised through an at-the-market offering, Strategy has already deployed $18.6 billion. In addition, Strategy recently raised another $711 million via the issuance of its Series 2 preferred stock (STRF). These figures indicate that Strategy is nearing the limits of its current funding strategy. The inability to secure additional funds through equity issuance could force the company to alter its approach, potentially causing further strain on its stock price.
The analyst set a target stock price of $220—roughly 30% lower than the current trading levels near $300—indicating that he expects the market to react negatively if Strategy’s financing issues continue.
5. A Cautionary Signal for Strategy
Monness Crespi’s downgrade of Strategy’s stock to “sell” reflects mounting concerns over the sustainability of its aggressive Bitcoin buying strategy. Despite a stellar performance in recent years, the potential for funding roadblocks poses a significant risk. If Strategy is unable to shift its financing model to include more fixed income instruments, its ability to continue accumulating Bitcoin at current rates will be severely hampered—potentially triggering a sharp decline in its stock price.
Investors are advised to closely monitor Strategy’s funding activities and broader market conditions, as any failure to secure new capital could have far-reaching implications for the company’s valuation and for the broader cryptocurrency investment landscape.
