Peter Schiff Warns of Strategy Bankruptcy..."Shareholder Value Will Be Sold Off Dirt Cheap"

▲ 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 increased its debt to buy Bitcoin. Continuously issuing shares causes 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 preferred shares recently issued by Strategy, offering an annual yield of 11.5%, as the core of the problem. 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.

Frank Giustra, a Canadian mining financier, also likened Strategy's actions to a Ponzi scheme. Giustra warned that a structure that buys assets with debt could collapse like a sandcastle in the next financial crisis. If macroeconomic pressures intensify, the leveraged system can collapse instantly. 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 is voluntarily managing its capital and that the market will evaluate the results. However, Chairman Schiff repeatedly emphasized the potential collateral shortage in the event of a Bitcoin price drop. This is a dangerous gamble that goes beyond a simple strategy, risking the survival of the entire company.

Strategy has bet everything on the rise of Bitcoin, but internally, a flaw in stock value dilution has been exposed. Even if Bitcoin's price rises, if the per-share value falls, investors will find it difficult to realize actual profits. The current financial structure has lost market trust, and doubts about the company's ability to repay debt have grown. Investors must now calmly examine the company's poor financial health rather than market 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.*