Fortune Magazine: The magic of MicroStrategy is gone, risking a "death spiral," but two Wall Street firms disagree.

Fortune Magazine warns that MicroStrategy’s heavy special dividends could drag it into a death spiral; however, Wall Street institutions Benchmark and TD Cowen still like its long-term model and maintain a Buy rating.

Fortune Magazine: MicroStrategy fears a death spiral, and opinions are sharply divided

After MicroStrategy (Strategy) sold a small amount of Bitcoin again after many years, questions have kept coming from all sides. Fortune recently ran a feature story examining Chairman Michael Saylor’s high-stakes bet to expand the company’s Bitcoin footprint through special stock, warning that it could trigger the firm’s death spiral.

In response to the media’s pessimistic predictions, two well-known Wall Street institutions issued reports with different views, supporting MicroStrategy’s long-term operating model.

The “magic” and math problem behind MicroStrategy

Shawn Tully, a senior contributing editor at Fortune, said plainly that the “magic” that used to keep MicroStrategy’s stock price high is fading.

As of June 9, MicroStrategy’s assets mainly consisted of about 844,000 Bitcoins, with a total value of approximately $51.1 billion. In addition, it has a software business valued at about $1.5 billion and $1 billion in cash—total assets of about $53.6 billion.

On the liabilities side, MicroStrategy owes about $6.2 billion in convertible corporate bonds. And since the beginning of 2025, it has issued large amounts of special stock; the outstanding special stock is as high as $15.5 billion. After deducting debt and special stock, the net asset value for common shareholders is about $31.8 billion.

Even with this underlying value, MicroStrategy’s market capitalization in early June still reached $41.6 billion, enjoying a premium of up to 31%.

Tully points out that Saylor has used special stock to significantly increase leverage on the price of Bitcoin. If the price of Bitcoin falls to $50,000, MicroStrategy’s net asset value would shrink to around $23 billion, and the stock price could face a 46% drop.

Is MicroStrategy’s cycle really dangerous?

In addition, MicroStrategy currently has to pay up to $1.5 billion per year in special stock dividends, but the company only has $1 billion in cash reserves—likely not enough to support a year’s worth of dividend payments.

MicroStrategy sold Bitcoin worth about $2.5 million at the end of May to pay the dividends, which has raised market concerns. To keep paying dividends, MicroStrategy may be forced to issue more special stock. This cycle of continually increasing cash outflows and continually issuing new shares increases the risk that the company gets trapped in a death spiral.

• **Further reading:**MicroStrategy’s Saylor: What I said was that “you all” should never sell Bitcoin—I didn’t say the company wouldn’t sell coins

Gold bull Peter Schiff joins the criticism

Renowned gold bull Peter Schiff also issued warnings about MicroStrategy’s current situation. He believes MicroStrategy’s past success in buying Bitcoin was built on the idea that its stock was sold at a premium. But now, with new shares being issued at a discount, selling shares at a discount to buy Bitcoin would dilute existing shareholders’ equity.

In addition, the price of MicroStrategy’s special stock STRC has fallen, causing its yield to rise to over 12.3%, which means the company’s cost of raising funds is rising significantly.

Two Wall Street institutions back MicroStrategy—why?

Faced with external concerns that MicroStrategy could trigger a death spiral, Wall Street research firms Benchmark and TD Cowen take the opposite view and both give MicroStrategy a Buy rating.

Benchmark analyst Mark Palmerb believes the “death spiral” narrative is too alarmist. Before the company is forced to liquidate its Bitcoin reserves worth nearly $55 billion, it still has $1 billion in cash available to pay dividends.

Because MicroStrategy’s perpetual special stock has no mandatory maturity date, he thinks it is unlikely to set off a chain reaction of accelerated selling.

MicroStrategy has also recently announced that it will add to its holdings by buying 1,587 Bitcoins for roughly $100 million, and at the same time change STRC’s dividend payout frequency to twice per month. MicroStrategy CEO Phong Le emphasized that the purpose of this move is to stabilize the price, reduce cyclicality, and promote liquidity.

• **Related report:**MicroStrategy uses a price-cut playbook? After selling a small amount of Bitcoin, it buys more on the dips of 1,550 coins; STRC approved for semi-monthly payouts

TD Cowen analysts Lance Vitanza and Jonnathan Navarrete also noted in their report that the burden of paying STRC dividends remains within a manageable range.

They believe STRC can effectively cushion volatility when the price of Bitcoin falls, delivering positive or flat returns, and has the characteristics of both capital preservation and an income tool.