Peter Schiff Warns of Strategy Bankruptcy... "Will Sell Off Shareholder Value at a Bargain"

▲ Strategy (MSTR), Bitcoin (BTC)/ChatGPT generated image

Strategy, which has staked its life on accumulating Bitcoin (BTC), is facing the destruction of shareholder value and a financial collapse crisis due to excessive stock issuance and a surge in debt.

According to crypto media outlet U.Today on April 19 (local time), Peter Schiff, Chairman of Euro Pacific Capital, strongly criticized Strategy's Bitcoin buying strategy. Chairman Schiff pointed out that the company is increasing debt to buy Bitcoin. The continuous issuance of shares leads to fatal value dilution for existing shareholders. Currently, the cost of capital raising is much higher than in the past, placing a significant burden on the company's finances.

Chairman Schiff identified the core of the problem as Strategy's recently issued preferred shares with an annual return of 11.5%. Chairman Schiff asserted, "The company's software business revenue cannot cover high-interest dividends and interest expenses." If accumulation continues without profit, the company will eventually have to issue more shares at a bargain price. This creates a vicious cycle that drives down the equity value of common stock holders.

Canadian mining financier Frank Giustra also likened Strategy's actions to a Ponzi scheme. Giustra warned that a structure that buys assets with borrowed money could collapse like a sandcastle in the next financial crisis. When macroeconomic pressures intensify, the leveraged system can collapse in an instant. The financial damage will ultimately be borne by ordinary shareholders who have no means of defense.

Some in the virtual asset industry view this strategy as the company's independent management decision. BitMEX Research diagnosed that the company operates its capital voluntarily and that the market will evaluate the results. However, Chairman Schiff repeatedly emphasized the potential collateral shortfall that would occur if Bitcoin prices fall. This is beyond a simple strategy; it's a dangerous gamble for the survival of the entire company.

Strategy has bet everything on the rise of Bitcoin, but internally, the flaw of stock value dilution has been exposed. Even if Bitcoin prices rise, if the per-share value falls, investors will find it difficult to achieve real returns. The current financial structure has lost market confidence, and doubts about the company's ability to repay debt have grown. Investors must now soberly examine the company's poor financial health rather than price fluctuations.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*