Strategy increases coin purchases but is downgraded, financing dilutes Bitcoin returns

TD Cowen Investment Bank on the 15th downgraded the one-year target price for Bitcoin treasury company Strategy from $500 to $440, a 12% decrease. Paradoxically, Strategy’s Bitcoin purchase scale has actually increased this year, but the higher purchase pace mainly relies on equity financing, which directly lowers the Bitcoin yield per share. This reflects a fundamental dilemma faced by the treasury company: dilution from financing.

How Financing Dilution Hampers Returns

The logic behind the data

Strategy’s recent week’s financing activities clearly illustrate the issue. The company issued approximately 6.8 million common shares and 1.2 million floating-rate preferred shares within the week ending January 11, raising a total of $1.25 billion, almost entirely used to purchase 13,627 Bitcoins. This financing looks very positive, but the problem lies in the financing price being close to the book value.

What does this mean? When the company raises funds at a price close to book value, the new shareholders’ holdings of Bitcoin per share increase only modestly. Although the total Bitcoin amount has increased, the dilution across more shares weakens the growth of Bitcoin value per unit share.

Noticeable decline in yield data

TD Cowen’s data clearly demonstrates this issue:

Dropping from 22.8% to 7.1% represents a decline of over 69%. This isn’t due to poor Bitcoin performance but because of the peak of financing dilution effects in 2026.

The paradox of increased Bitcoin purchases and declining yields

Interestingly, Strategy’s Bitcoin purchase scale has actually been increased this year:

• Original expectation: acquire an additional 90,000 BTC
• New expectation: acquire an additional 155,000 BTC
• Increase: 72%

However, this more aggressive purchase plan has led to a target price downgrade. The reason is straightforward: these extra purchases are mainly financed through issuing new shares rather than Bitcoin appreciation. It’s like a cake that has grown bigger but has been cut into more pieces.

Market context and timing of financing

During the recent Bitcoin price correction, Strategy continued to significantly ramp up its Bitcoin purchases. According to relevant information, Bitcoin rose 6.41% over the past 7 days, but it indeed experienced a correction earlier. Strategy’s increased buying at this time is a bullish sign.

However, TD Cowen pointed out that because the financing price is close to book value, the short-term gains from this increased buying are limited, and only a significant rise in Bitcoin prices would make it reasonable. In other words, Strategy is betting that Bitcoin will surge substantially in the future, which would offset the impact of financing dilution.

How analysts view the long-term outlook

Interestingly, despite the target price downgrade, TD Cowen remains optimistic about Bitcoin’s long-term price. Analysts forecast:

• End of 2026: approximately $177,000 per Bitcoin
• End of 2027: approximately $226,000 per Bitcoin

This suggests that if Bitcoin indeed follows this trajectory upward, the financing dilution issue for Strategy will improve by 2027. This also explains why the expected Bitcoin yield in 2027 is projected to rebound to 8.1%.

Summary

The fundamental reason for Strategy’s target price downgrade is not the outlook for Bitcoin itself but the dilution of shareholder returns caused by financing methods. The company uses equity financing to buy Bitcoin, which increases the total Bitcoin holdings but dilutes earnings per share. This is an unavoidable issue for treasury companies during large-scale financing expansion.

For investors, the core question is: Do you believe Bitcoin can appreciate at the rate predicted by TD Cowen? If yes, then financing dilution will be offset; if not, shareholder returns will remain under pressure. In the short term, the 7.1% yield in 2026 is indeed far below historical levels, but this may just be the pain of a peak financing period.