Strategy Incorporated (MSTR): A Bear Case Theory

We came across a bearish thesis on Strategy Incorporated on r/wallstreetbets by u/Intelligent-Grape-12. In this article, we will summarize the bears’ thesis on MSTR. Strategy Incorporated's share was trading at $172.99 as of January 13th. MSTR’s trailing and forward P/E were 6.66 and 2.40, respectively according to Yahoo Finance.

MicroStrategy Inc. (MSTR) currently operates less as a traditional software company and more as a highly leveraged Bitcoin holding vehicle with a legacy software business attached. Its stock behavior mirrors Bitcoin volatility, surging during crypto bull runs and suffering when the market is flat.

The company faces significant fixed cash obligations, including preferred dividends and interest on debt, totaling roughly $300–340 million annually, while its software operations only break even. To meet these obligations, MSTR relies primarily on either issuing additional stock or selling Bitcoin. Issuing stock is only sustainable if the market consistently values the company above the Bitcoin it holds, but as this premium erodes, dilution becomes destructive rather than strategic.

In a scenario where Bitcoin remains flat, MSTR gradually depletes its cash reserves, giving it a realistic survival window of 2.5 to 3.5 years without drastic intervention. Even if Bitcoin surges and mainstream adoption occurs, MSTR’s appeal diminishes because investors can access exposure through ETFs or direct ownership, eliminating the need for a leverage-enhanced proxy. The company’s model depends entirely on continuous, volatile bull markets and investor tolerance for ongoing dilution, which cannot be counted on indefinitely.

Any scenario outside sustained Bitcoin rallies—sideways markets, crashes, or widespread ETF adoption—would force MSTR to sell Bitcoin or otherwise restructure, making its long-term viability highly uncertain. Current dynamics present a high-risk, high-volatility investment rather than a stable, cash-generating business.

Previously, we covered a bearish thesis on Strategy Incorporated (MSTR) by Charly AI in May 2025, which highlighted the company’s leveraged Bitcoin exposure, deteriorating software operations, heavy debt load, and structural cash burn risks. The company's stock price has decreased by approximately 54.66% since our coverage began. This thesis remains valid given MSTR’s ongoing reliance on dilution and Bitcoin volatility. u/Intelligent-Grape-12 shares a similar outlook but emphasizes the limited survival window and the risks posed if Bitcoin goes sideways or mainstream adoption reduces the company’s unique appeal.

Strategy Incorporated is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held MSTR at the end of the third quarter which was 45 in the previous quarter. While we acknowledge the potential of MSTR as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.