New Evidence: Unraveling MSTR’s Ponzi Structure

Author: Sima Cong, AI Channel

No strategy in finance is foolproof.

MicroStrategy's path to failure doesn't require a significant drop in Bitcoin prices; in fact, MicroStrategy isn't even worried about a price drop.

For speculators, the pursuit is greater gains, not who holds more Bitcoin.

We must clarify a widely overlooked fact: the true target of investors' transactions is MicroStrategy's stock. MicroStrategy's persistent claims on social media platforms that Bitcoin is the promised land aren't motivated by faith, but rather by cleverly employing conceptual equivalence and substitution techniques to shift investor expectations from the stock price to Bitcoin's future. MicroStrategy's financing providers are acutely aware of this, yet tacitly acknowledge it. Whether it's convertible bonds, preferred shares, or common stock, the bottom line is that the stock price needs someone to take over. In an age of information overload and scarce belief, capital no longer simply pursues profit but rather the "securitization of narratives." At the same time, I will systematically explain why MicroStrategy has consistently bought into Bitcoin at its peaks. Preface Recently, widespread discussion has emerged on social media about the potential shutdown of MicroStrategy's model. This is due to the continuous decline in MicroStrategy's mNAV indicator and its falling stock price, which has triggered discussions about its financing difficulties and potential shutdown. The first and foremost impact was the continuous decline in its stock price, which did not rise in tandem with its Bitcoin purchases. Compared to its peak in July, it has plummeted by over 20%. Meanwhile, the price of Bitcoin did not fall significantly during the same period. During its Q2 2025 earnings call, the company pledged not to issue new common stock below 2.5x mNAV unless required by specific obligations. Many believed this commitment was intended to protect shareholders from excessive dilution. However, the reversal was swift. On August 18, 2025, observers insisted the company abruptly abandoned this protection. Its new policy allowed for the issuance of shares at mNAVs below 2.5 times “if management deems it advantageous.” The announcement sparked outrage among investors, who viewed the move as a bait-and-switch that significantly increased dilution risk, especially with mNAV recently reported near 1.68 times. On August 20th, Strategy (MSTR) announced it would lower the threshold for its share issuance to raise more capital for Bitcoin purchases. A class-action lawsuit filed this year accused the company of making misleading statements about its Bitcoin strategy and financials. Late last year, critics such as investment analyst Michael Lebovitz accused Strategy of "preying on investors" by using optimistic Bitcoin rhetoric to increase stock volatility and secure cheaper financing. The reason for abandoning the seemingly yesterday's promise may be limited market demand for MicroStrategy's preferred shares.

Let’s first look at MicroStrategy’s financial situation

MicroStrategy’s mNAV has narrowed significantly, falling from 3.89 times in November 2024 to 1.56 times in August 2025.

Let's take a look at its financial data:

Take the 2024 data as an example:

• EBITDA: -18.5 US$66.51 million (significant losses, reflecting pressure from its core business and Bitcoin's volatility). Leveraged free cash flow: -US$66.51 million (the company's actual cash outflow, the "cash deficit" after interest and investment expenses). This indicates that even with negative EBITDA, the company still has to pay interest and capital expenditures, further increasing cash flow pressure and posing a higher risk. EBITDA: represents the company's "pure profit from its core business," before deducting any capital expenditures, interest, and taxes. Leveraged free cash flow: represents the actual money "into shareholders' pockets," after deducting business taxes, capital expenditures (such as equipment purchases and R&D investments), and all debt interest expenses. Valuation: Next, we'll use the latest data and two valuation methods. EV/REV multiples for SaaS/software companies, slow-growth traditional software: 2–6x. MSTR’s software business has almost zero growth and is valued at 3x.

• Conclusion:

  •  MSTR's implied Bitcoin value (94.1 billion) is significantly higher than the actual BTC market value (71.3 billion);

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  •  If the core business (software) value is 0, the premium is 34%;

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  •  Implied BTC EV = 108.5 billion, compared with the actual BTC market value of 71.3 billion → premium 52%;

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  •  MSTR stock price needs to fall by 24% (336.57) to offset the premium at 256.4;

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  •  Assuming the quantity remains unchanged, Bitcoin needs to rise to 150,000 to offset the premium (8-20 was 113335), which requires a 32.35% increase;

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  •  But if the quantity remains unchanged and the Bitcoin price remains at $120,000, if MicroStrategy's stock price falls to $200, it will be a negative premium;

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  A phenomenon that cannot be ignored

  As of May 2025, a total of 199 entities held a total of 3.01 million BTC (approximately US$315 billion), and this number is still growing rapidly. According to Bitcointreasuries.net, 199 entities currently hold a total of 3.01 million BTC ($315 billion). Of this total, 147 private and public companies hold 1.1 million BTC ($115 billion). Recently, a wave of companies has announced new Bitcoin treasury strategies. These include diversified balance sheet firms and specialized Bitcoin treasury firms, spanning a variety of countries and industries. As of the first half of 2025, over 40 companies have publicly announced plans to include Bitcoin on their balance sheets, collectively raising tens of billions of dollars to execute these strategies. These companies vary in industry, geography, execution model, and path to market.

  Notable ones include:

  · Metaplanet (Japan): one of the earliest international players to take advantage of Japan’s ultra-low interest rate environment;

  · Semler Scientific and GameStop (US): their Bitcoin treasury strategies attracted mainstream media attention;

  · Twenty One Capital: a specialized firm backed by Tether and Cantor;

  · Strive and Nakamoto: quickly went public through reverse mergers. The expansion of Bitcoin treasury firms is still in its early stages, but the model is already beginning to extend to other crypto assets—for example, Solana: DeFi Development Corp (market capitalization $100 million, holding over 420,000 SOL), Upexi, and Sol Strategies; and Ethereum: SharpLink Gaming, which raised $425 million in a funding round led by Consensys. A very concrete fact: a sharp stock price surge. Metaplanet, known as the "Japanese version of MicroStrategy," saw its stock price rise 145.59% year-to-date in 2025. Sequans Communications raised $384 million through debt and equity markets to purchase the world's most popular token. Following the announcement, its stock price soared 160%. But this is a little-known semiconductor company. Thanks in large part to the guidance of Bitcoin evangelist Michael Saylor. Since 2020, the American cryptocurrency magnate has been spending billions of dollars on Bitcoin almost weekly and holding conferences to encourage others to follow suit. Saylor's company, Strategy, originally a software company, has transformed itself into a Bitcoin accumulator, with its stock price soaring over 3,000% over the past five years. Biotech companies, gold miners, hoteliers, electric vehicle companies, and e-cigarette manufacturers, among others, are rushing to buy crypto tokens. As of August 5, approximately 154 publicly traded companies had raised or pledged to raise a total of $98.4 billion to purchase cryptocurrencies. Before this year, just 10 companies had raised $33.6 billion. Trump's family media company raised $2 billion in July to purchase Bitcoin and related assets. Companies that can demonstrate a consistent commitment to raising funds to purchase cryptocurrencies are favored by investors, who value their shares even higher than the value of their Bitcoin holdings. An underestimated but potentially volatile risk: MicroStrategy's collapse may not require a significant drop in Bitcoin prices. Why do investors pay a premium early on, hoping to receive higher returns per Bitcoin in the future? If a company can quickly purchase more Bitcoin, equity investors effectively indirectly hold more Bitcoin per share. More public companies are announcing this reserve strategy, expanding from Bitcoin to other cryptocurrencies. These two points reveal a significantly underestimated fact: a potential path to crisis. MicroStrategy's premium convergence → financing difficulties → forced use of Bitcoin → signaling effects spread → market chain reactions – these form a potential path to crisis. Starting Point: Premium Convergence – The premium of MSTR's stock price relative to the value of its BTC holdings gradually disappears. Intermediate Link: MSTR Constraints – MSTR can no longer finance the purchase of more BTC at a "high premium," and the market expects its buying power to dry up. Direct Transmission: Weakened Demand – MSTR, as a major buyer, loses its leverage, widening the demand gap for BTC. End Point: BTC Decline – Investor expectations deteriorate, leading to a systemic decline in BTC prices. Feedback Loop – BTC declines → MSTR's assets shrink → lower stock price → premium turns to discount → accelerating market panic. When other similar "Bitcoin proxy stocks" with even greater gains emerge in the market, speculative capital will naturally flow to targets with higher returns. MicroStrategy, once the exclusive broker, is seeing its scarcity diluted by other "copycats" and more direct ETFs. MicroStrategy's financing structure includes interest-bearing liabilities such as convertible bonds. These debts require interest payments, which are fixed expenses. When equity financing is blocked, the company's most direct option to maintain operations and repay debt is to use its most valuable asset—Bitcoin—as collateralized loans. If the Bitcoin price does not rise significantly, or the company is unable to obtain new loans to "finance debt with debt," it will eventually face fixed debt repayments or interest payments. Selling Bitcoin will become the only option. This scenario is entirely possible. MicroStrategy's financial model is essentially a large, one-way Bitcoin call option. If the underlying asset price does not rise, it will eventually face a liquidity crisis.

  It's not about quantity. For a company that embraces "buy, never sell" as dogma and positions itself as a Bitcoin believer, even selling 1,000 Bitcoins carries far greater signal significance than financial implications.

  • Faith Collapse: It would signal to the market that Saylor's faith is not unconditional, the company's model is not impeccable, and they will succumb under pressure.

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  • Model Collapse: This would trigger a crisis of confidence in all "Bitcoin proxy stocks" and the cryptocurrency lending model. Because MicroStrategy, as the leading company, would fall, the entire model would be called into question. In the game of "whoever hoards the most coins wins," MSTR isn't irreplaceable—it's merely a "leveraged BTC proxy." The ultimate winner isn't the first person in, but the one with the most money, the best financing, and the best storytelling skills. Everyone's chasing the biggest stock price gains and the most speculative potential. The real competition isn't about "who believes in BTC more," but "who can raise more money and whose stock price rises faster." While Saylor touts Bitcoin's "promised land," investors ultimately chase speculative gains. When MicroStrategy's stock price lags behind its peers, or even behind Bitcoin itself, investors abandon it, deprived of its speculative value. For speculators, the pursuit is "targets with greater stock price gains and more excitement," not who holds more Bitcoin. This pursuit of speculation decouples a company's fate from Bitcoin's price and instead makes it closely tied to its own relative stock price performance. If hoarding Bitcoin is the promised land, then who has more money is the answer. MicroStrategy's model lacks any moat. Its core competency is simply "being first," with no patents, technology, or brand barriers. Any company with sufficient capital can replicate this model: issuing stock, lending, and purchasing Bitcoin. The fact that 154 public companies have raised or pledged to raise a total of $98.4 billion to purchase cryptocurrencies fully demonstrates this point. MicroStrategy's potential failure point isn't the price of BTC itself, but the exhaustion of its stock model's appeal. When it can no longer attract capital through "stock market arbitrage," this model will automatically halt, and even trigger reverse liquidations due to fixed expenses. Bitcoin is merely its "chip," and the real crux of the matter lies in whether the market is still willing to pay for its share price premium. The fragility of corporate financial structures; the leverage effect of market belief; the nonlinear risks of the cryptoasset ecosystem; and the typical prelude to a "black swan" event: a seemingly localized issue (MicroStrategy's difficulty in raising funds) can trigger global shocks due to signaling effects. This could even be a dead end. This is no longer a question of MicroStrategy's or Saylor's personal beliefs, but rather the mathematical and human logic of the business model itself. It's a game of "who grows faster?" MicroStrategy's business model essentially leverages its early-mover status to elicit a market premium for its stock. But as more players enter the market, the game becomes a race to see whose stock rises faster and more attractively. If MicroStrategy's stock price is surpassed, it will lose the favor of speculators and, consequently, its sole source of financing. The divergence between core assets and source of value: The company's core asset is Bitcoin. However, its source of value is a speculative premium. These two sources are not directly linked. Bitcoin's price can fluctuate sideways, but if new, more speculative assets emerge, the MicroStrategy premium will be absorbed. MSTR's justification is based on relative performance, not absolute value. Investors won't say, "BTC is up, and MSTR is up too. That's great." They'll say, "BTC is up 30%, and MSTR is only up 10%. Why shouldn't I just buy BTC?" Its survival depends not on Bitcoin's price itself, but on whether speculators continue to be willing to hype it as a "leveraged Bitcoin." Once the market no longer believes it's the best proxy for the "Bitcoin Promised Land," it will fall into a path of automatic halt → reverse liquidation. Why does MicroStrategy consistently buy at high Bitcoin prices? This has always seemed counterintuitive. Even though Saylor consistently claims Bitcoin is the future, why buy at high prices when Bitcoin has a public market price? The answer is: MicroStrategy's model inherently requires buying at high prices. MicroStrategy's "buying" behavior itself is the most important part of its business model, and its purpose goes far beyond simply increasing Bitcoin holdings. For a company heavily reliant on financing, the size of its balance sheet is crucial. After MicroStrategy raises funds through issuing stocks or bonds at high premiums, it converts these funds into Bitcoin. This rapidly expands the company's total assets, amplifying its income statement flexibility (recognizing gains when BTC appreciates, attracting speculative capital), and making the company appear larger and more powerful from a financial perspective. This scale effect makes it easier to secure the next round of financing, whether from a bank loan (collateralized by its expanded assets) or from a stock offering in the capital markets. After completing a round of financing, the company has already transferred the risk to new investors. Unless the Bitcoin price plummets to the point of insolvency, the company is safe in the short term. This "buy at the high" behavior is the most effective nonverbal advertising. When retail investors and investors wondered, "Is this the high?", Saylor and MicroStrategy's actions provided a clear answer: "No." This is a sophisticated marketing tactic that reinforces narratives through action. It sends the following signals to the market: "We have enough confidence to buy all in without hesitation, even at the current price." "Compared to Bitcoin's future value, the current price is insignificant." "Don't worry, just follow us and buy." This buying-at-the-highs strategy is designed to attract new "buyers." By demonstrating fearless "faith," it allays the fears of new investors and ensures a continued influx of funds. It gives retail investors the illusion that there's no need for timing, and by demonstrating their own courage to buy at high prices, it reinforces their belief.

    Two direct pieces of evidence

    The first is that Saylor has been constantly posting on platform X to report the number of bitcoins he holds and the total market value. The second is that he has been tirelessly claiming the book profits he has realized.

    

    1. Balance sheet expansion

    Digital assets (BTC) are recorded as assets at fair value:

    BTC price rises → asset value soars → total assets and shareholders' equity increase → debt-to-asset ratio improves (appears safer);

    2. "Beautification" of the income statement

    If BTC price rises → "unrealized gains" are generated → recorded in "other income" → reverse the small profits or losses of the software business → net profit turns positive → It looks "profitable";

    But please note that these earnings are unrealized, non-cash, and unsustainable. They are merely paper wealth, but they are enough to support stock prices and financing.

    So, this is why MicroStrategy has been buying Bitcoin at high prices. Now, do you understand why Saylor dares to declare an extreme high price for Bitcoin in the future?

    

    December 14, 2000

    The U.S. Securities and Exchange Commission (SEC) said today that two executives of MicroStrategy Inc. and its former chief financial officer have agreed to pay a total of $11 million to resolve civil accounting fraud charges related to the restatement of the software vendor's financial results last March. The SEC said MicroStrategy did consent to a cease and desist order and pledged to make "significant" internal changes to ensure its compliance with securities laws in the future. Additionally, the company's corporate controller and accounting manager agreed to separate cease and desist orders for reporting and recordkeeping violations. MicroStrategy CEO Michael Saylor, along with the company's chief operating officer, Sanju Bansal, and Mark Lynch, resigned from their positions as CFOs at the data analytics software developer earlier this year as part of their settlement with the SEC. The three executives did not admit or deny the accounting fraud allegations, according to the SEC. But the commission said they agreed to pay a civil penalty of $350,000 each and disgorgement totaling $10 million, with Saylor accounting for $8.3 million. Lynch also agreed to an order barring him from practicing accounting for at least three years. The U.S. Securities and Exchange Commission (SEC) launched the investigation after revealing in March that MicroStrategy had exaggerated its revenue and earnings for the past two years and needed to restate its financial results.