Strategy Inc. (NASDAQ:MSTR) has bought $3.38 billion of Bitcoin (CRYPTO: BTC) over two weeks, but analyst Dylan LeClair says the bigger move is a balance sheet restructuring that quietly happened alongside the purchase.
The Debt Swap Nobody Noticed
Strategy just crossed a major milestone: perpetual preferred stock now outweighs convertible bonds on the balance sheet for the first time.
Convertible debt dropped to 9.18% of Bitcoin holdings from 9.67% at the start of the year. Perpetual preferred shares like STRC climbed from 9.19% to 9.36%.
Here’s why that matters: convertible bonds have expiration dates. When they come due, Strategy has to either pay them back or refinance—and if Bitcoin prices are crashing when that bill comes due, the company faces tough choices.
Preferred shares are different. They never mature. Strategy pays a dividend, but there’s no principal repayment and no clock ticking toward a refinancing deadline.
That means no forced Bitcoin sales during market crashes.
When MSTR Stock Crashes, Converts Become A Problem
The issue with convertible bonds shows up when MSTR stock drops sharply.
When the stock was trading at $400, those $8.2 billion in converts mostly acted like equity.
Bond investors figured they’d eventually convert into stock, so they didn’t worry much about getting repaid in cash.
But when MSTR fell to $150 in November alongside Bitcoin’s pullback, those same bonds started looking like real debt again.
LeClair’s analysis shows that bond investors suddenly viewed an extra $2.5 billion as debt that Strategy would need to repay before preferred shareholders get paid.
That’s a problem because investors who own STRC preferred shares now see more debt sitting ahead of them in line.
When that happens, STRC becomes a riskier investment.
Riskier investments demand higher returns, which means Strategy has to pay more to borrow money through preferred shares.
In extreme cases, investors refuse to buy STRC at all, cutting off Strategy’s access to capital when the company needs it most.
The Fix: Replace Convertable Shares With Preferred Shares
Strategy’s plan is straightforward—eliminate convertible debt and fund everything through preferred shares instead.
Over the past two weeks, Strategy issued $119 million of STRC, then another $294 million. Those preferred share sales happened at the same time Strategy was selling common stock to raise cash for the Bitcoin purchases.
That dual issuance accomplished two things: Strategy bought Bitcoin and restructured the balance sheet at the same time.
Once the converts are gone, the preferred shares have nothing senior to them that changes based on MSTR’s stock price.
Credit spreads stabilize, borrowing costs drop, and Strategy can sell prefs even when Bitcoin is getting hammered.
LeClair also pointed out Strategy built a USD reserve recently.
That cash buffer removes concerns about dividend coverage and removes another reason credit investors might get nervous about STRC.
What Happens Next
Strategy now holds 709,715 BTC worth roughly $62 billion. The company is funding that through a mix of common stock, convertible bonds, and preferred shares.
The next phase is pushing converts down further while ramping up STRC issuance.
If credit spreads on STRC tighten as LeClair expects, Strategy gets access to cheaper capital and can accelerate Bitcoin buying. The market hasn’t fully priced in this shift yet.
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