S&P Slaps Junk Rating On Michael Saylor’s Strategy, Citing ‘Speculative’ Bitcoin
S&P Global slapped a junk rating on Michael Saylor’s Strategy, citing its heavy reliance on volatile Bitcoin and limited dollar liquidity.
The credit rating agency initiated coverage of the Bitcoin treasury firm with a B- rating, six notches below investment grade, saying it has “speculative credit quality with increased default risk.”
It pointed to the firm’s concentrated Bitcoin holdings, narrow business focus, and weak risk-adjusted capitalization as key weaknesses.
S&P also warned of an “inherent currency mismatch,” noting that all of Strategy’s debt is denominated in US dollars while nearly all its assets are held in Bitcoin. A sharp drop in BTC’s price, it said, could force the company to sell holdings at a loss to meet obligations, creating potential liquidity stress.
Saylor Lauds ‘First-Ever’ Rating For A Crypto Treasury Firm
Still, Saylor took to X to celebrate the development, calling it the “first-ever” rating for a Bitcoin treasury firm from a “major credit rating agency.”
Others in the industry echoed Saylor’s remarks. Among them was KindlyMD CEO David Bailey, who predicted that the “market demand for treasury companies is about to explode” following the rating.
Ratings are a requirement for many pension funds and other institutional investors to be able to invest in corporate paper.
Strategy Shares Climb
Strategy shares climbed more than 2% yesterday, but have slumped 9% in the past month and more than 19% in six months, according to Google Finance.
MSTR price (Source: Google Finance)
Strategy Keeps On Buying
Strategy, which used to be an enterprise software company, uses almost all of its excess cash to purchase BTC and grow its reserves. It also issues convertible debt, preferred stock, and equity to raise capital for Bitcoin buys.
Since Strategy started purchasing Bitcoin back in 2020, the company has become the largest BTC treasury firm globally. Data from Bitcoin Treasuries shows that Strategy has accumulated 640,808 BTC over the years. At current prices, this values the holdings at approximately $72.97 billion.
Strategy is also sitting on an unrealized gain of over 52%, which equates to more than $25.53 billion.
Top 20 corporate BTC holders (Source: Bitcoin Treasuries)
Recently, however, Strategy and other digital asset treasury firms have faced pressure due to their declining stock prices, which has hindered their ability to raise more capital for additional buys.
Despite that, Strategy has continued to purchase Bitcoin even as other crypto treasury firms hit the brakes.
Strategy’s latest Bitcoin buy was on Oct. 27, when the firm purchased another 390 BTC for around $42.4 million at an average price of $111,117 per coin.
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