Strategy (formerly MicroStrategy, MSTR), a prominent software company turned Bitcoin accumulator, finds its high-stakes, leveraged cryptocurrency acquisition strategy under intense scrutiny from credit rating agencies. Even as the company announced yet another significant purchase of 390 Bitcoins last week, S&P Global Ratings delivered a stark assessment, assigning a “B-” rating – firmly placing its debt in the non-investment grade, or “junk bond,” category. This cautionary stance, however, stands in stark contrast to the bullish outlook from investment bank TD Cowen, which maintains a “Buy” rating, projecting a potential doubling of the stock’s value.
S&P’s “B-” rating positions Strategy six notches below investment grade, though a “stable” outlook suggests no immediate downgrade risk. The agency’s report highlights critical vulnerabilities in Strategy’s financial architecture. A primary concern is the company’s overwhelming asset concentration in Bitcoin, coupled with insufficient U.S. dollar liquidity and negative risk-adjusted capital. These factors, S&P argues, significantly outweigh Strategy’s demonstrated ability to raise capital in financial markets and its otherwise prudent debt management practices.
Matthew Sigel, Head of Digital Asset Research at VanEck, aptly summarized the situation, stating, “The company currently has the ability to repay its debts, but it is extremely vulnerable to shocks.”
A core tenet of S&P’s downgrade rationale is the inherent “currency mismatch” within Strategy’s balance sheet. While the vast majority of its assets are denominated in Bitcoin, its liabilities and dividend obligations are primarily in U.S. dollars. This creates a precarious situation: should economic headwinds make it difficult to secure new capital, Strategy could be forced to liquidate its Bitcoin holdings, potentially at a loss, to meet its dollar-denominated commitments.
S&P explicitly warned that a downturn in Bitcoin prices, coupled with a decline in investor interest, would likely trigger a severe liquidity crunch for the company.
TD Cowen’s Unwavering Conviction: MSTR Poised for 114% Upside, $620 Target
Despite the “speculative grade” label from S&P, U.S. investment bank TD Cowen has reaffirmed its “Buy” rating for Strategy, maintaining an ambitious price target of $620. This projection implies a staggering 114% upside from last Friday’s closing price, reflecting a deep-seated belief in the company’s long-term strategy.
TD Cowen analysts Lance Vitanza and Jonnathan Navarrete emphasize Strategy’s unique ability to “transform the market’s desire for volatility and returns into Bitcoin.” They underscore the growing “Bitcoin holdings per diluted share,” a metric that continues to climb as the cryptocurrency’s issuance rate slows, enhancing scarcity.
Looking ahead, TD Cowen forecasts that Strategy’s Bitcoin stash could approach 900,000 coins by 2027, representing over 4% of Bitcoin’s total supply. The analysts identify several powerful tailwinds for Strategy’s long-term valuation, including the gradual integration of Bitcoin into collateral systems by major banks and the Federal Reserve’s increasingly accommodative stance towards digital assets.
Strategy’s Bitcoin Treasury Swells to 640,808 BTC, Valued at $74 Billion
In its latest announcement on Monday, Strategy confirmed the acquisition of an additional 390 Bitcoins for $43.4 million, funded through the sale of “perpetual preferred stock.”
These recent purchases bring Strategy’s cumulative Bitcoin holdings to an impressive 640,808 coins. At current market prices, this digital treasury is valued at approximately $74 billion. The company’s average cost basis for these holdings stands at around $74,032 per Bitcoin, with a total investment of $47.4 billion, resulting in a substantial unrealized gain (floating profit) of approximately $26.6 billion.
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