Garlinghouse specifically criticised Strategy’s STRC preferred stock, which offers an attractive 11.5% dividend and was designed to trade near £100. He labelled its recent fall, approximately 25% below its par value to a record low, as a “damning indictment” of Saylor's approach. This pressure on Strategy's financial model has intensified as Bitcoin's price slipped below the £59,000 mark.
He strongly believes that “financial engineering does not drive long-term value,” asserting that the true, enduring value of any digital asset is derived from its inherent utility. Garlinghouse suggested that “Team Michael Saylor wasn't focused on the right stuff and that has hurt the overall market,” while explicitly separating this criticism from his personal conviction in Bitcoin as an asset.
For roughly a year, Strategy has employed a mechanism involving the issuance of preferred shares – a stock class that provides a fixed dividend – to generate capital for additional Bitcoin purchases. Their STRC share, with its 11.5% annual dividend, was engineered to maintain a trading price close to £100. Garlinghouse highlighted the fact that STRC is now trading around 25% below this intended level, presenting it as strong evidence of the strategy’s flaws. The stock reached an all-time low on Thursday, plummeting by as much as 26% below par. Concurrently, Strategy's common stock fell to its lowest point since February 2024, closing at approximately £82 on Friday, all amid Bitcoin’s drop below £59,000.
This critique comes during a week of mounting pressure on Strategy's model. A report from CryptoQuant advised Strategy to halt its Bitcoin acquisitions and instead rebuild its cash reserves. The report noted that the buffer supporting STRC’s dividends has significantly thinned, decreasing from over seven years of coverage to approximately 14 months. When STRC trades below £100, Strategy’s ability to issue shares and acquire Bitcoin is effectively stalled, leading the company to pause its buying activities.
Despite the significant downturn, Benchmark-StoneX analyst Mark Palmer offered a contrasting view, suggesting that Strategy’s funding engine has become “less efficient” rather than completely broken. He also dismissed comparisons between STRC and other assets that have experienced outright collapses. This ongoing debate underscores the complexities and risks involved in leveraging traditional financial instruments to invest in the volatile cryptocurrency market.
