Strategy Incorporated (MSTR): A Bear Case Theory

We came across a bearish thesis on Strategy Incorporated on The Small Cap Strategist’s Substack by Strategist and Architect. In this article, we will summarize the bears’ thesis on MSTR. Strategy Incorporated’s share was trading at $442.31 as of July 15^th. MSTR’s trailing and forward P/E were 4.12k and 1.25k, respectively according to Yahoo Finance.

MicroStrategy (MSTR) is portrayed as a structurally flawed, financially unsustainable vehicle masquerading as a Bitcoin development company. At its core, it is a decaying, unprofitable software business repackaged into a leveraged Bitcoin holding entity that relies entirely on perpetual equity and debt dilution to survive. Its “intelligent leverage” model—where new capital is raised at a premium to buy Bitcoin—is not value creation but a systematic transfer of wealth from new investors to earlier shareholders.

This strategy depends on a speculative premium that can only be maintained through a continuous stream of capital inflows, akin to a Ponzi-like dynamic. Executive Chairman Michael Saylor’s transformation from disgraced dot-com CEO to Bitcoin evangelist is marked by aggressive narrative control, cult-like marketing, and a history of legal and ethical issues.

The company’s capital structure is increasingly hostile to common shareholders, with over $13 billion in senior obligations (debt and preferred equity) that must be serviced before any value reaches the common equity. The firm’s operational cash flows are insufficient to cover even its basic financial obligations, let alone support future growth.

With new spot Bitcoin ETFs offering cheaper, safer exposure to BTC, MicroStrategy’s speculative premium is at risk of collapsing, thereby destroying its dilution-driven flywheel. Scenarios ranging from a Bitcoin bear market, to a premium collapse, to an inability to refinance maturing debt, all converge on a common outcome: total loss for common shareholders. MSTR is ultimately a leveraged bet with a negative margin of safety—mathematically doomed to converge toward zero.

Previously we covered a bullish thesis on Strategy Incorporated (MSTR) by Charly AI in May 2025, which highlighted its deteriorating software business, extreme leverage, and overdependence on Bitcoin. The company’s stock has appreciated ~16% since our coverage as Bitcoin rallied. The thesis still stands given structural weaknesses. Strategist and Architect shares a similar view but emphasizes dilution mechanics and capital structure risks.

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Disclosure: None.