Peter Schiff Critiques Bitcoin Mogul Over $1.44 Billion Reserve Strategy

Summary: Strategy Inc., formerly MicroStrategy, has established a $1.44 billion USD reserve to cover short-term financial obligations amid a decline in Bitcoin prices. This reserve is funded through stock sales and aims to address dividend and interest payments without liquidating their Bitcoin holdings, but it has drawn criticism from investors and Bitcoin critics alike.

Key Takeaways

Strategy Inc. has created a $1.44 billion USD reserve to meet immediate financial obligations.
The reserve, funded by selling Class A common stock, is designed to support dividend payments and interest on debt for at least 12 months.
The company's current Bitcoin holdings total approximately 650,000 BTC, valued at tens of billions but under pressure due to market volatility.
Critic Peter Schiff claims this move signals the failure of the business model and targets Michael Saylor with harsh criticism.
The reserve's establishment has sparked debate about the company's governance and long-term financial health.

Bitcoin

Strategy Establishes $1.44 Billion Reserve

On Monday, Strategy Inc. revealed it had successfully raised funds to create a $1.44 billion USD reserve aimed at meeting its near-term obligations as Bitcoin prices drop. This announcement followed a series of stock sales and a minor acquisition of additional Bitcoin, as outlined in various market reports.

The reserve was generated by selling Class A common stock using an at-the-market strategy. It is intended to fund preferred dividends and to manage interest payments on the company’s debts for at least a year, with aspirations to extend this coverage for 24 months or longer. Importantly, the firm noted that it did not sell any of its Bitcoin holdings to establish this cash reserve.

Presently, Strategy holds around 650,000 BTC, following a recent purchase of approximately 130 BTC for about $11.7 million. Despite the value of this Bitcoin stash — worth tens of billions at current market prices — the ongoing price fluctuations pose significant challenges for a company focused on maintaining its asset base.

Market Data BTCUSD currently trading at $86,692. Chart: TradingView

Bitcoin Market Reaction and Risks

The announcement sparked swift reactions from the investment community. The share price of Strategy has significantly declined this year. Analysts suggest that while the new cash reserve might alleviate immediate concerns, it does not eliminate larger financial challenges related to funding and debt obligations that loom over the company.

The reports indicate that convertible debt from previous financing efforts is approximately $8 billion. Additionally, the market-to-Bitcoin ratio (mNAV) suggests a decrease, approaching levels at which the management might contemplate selling Bitcoin only as a last resort.

Peter Schiff, a prominent Bitcoin skeptic, took to social media following the news to assert that this reserve proves the company’s business model has failed. He labeled Michael Saylor as a “conman” and declared his career in jeopardy.

“Today is the beginning of the end of $MSTR. Saylor was forced to sell stock not to buy Bitcoin, but to buy U.S. dollars merely to fund MSTR’s interest and dividend obligations. The stock is broken. The business model is a fraud, and @Saylor is the biggest con man on Wall Street.” — Peter Schiff (@PeterSchiff)

Other market analysts advised caution, indicating that this shift in strategy alters how investors should evaluate Strategy — from a straightforward Bitcoin treasury operation to a business with ongoing cash commitments. Furthermore, the company has downgraded its profit and Bitcoin-linked yield projections for 2025, reflecting a less optimistic outlook than earlier this year.

While the cash reserve aims to prevent forced sales of Bitcoin to satisfy fixed obligations, having cash on hand introduces its own set of challenges and raises governance questions among long-term investors.

Schiff's fierce commentary adds a political dimension to an issue framed primarily as a financial strategy, amplifying concerns among some investors about Strategy’s governance and financial planning, even as others dismiss his comments as politically motivated. Ultimately, the validity of Schiff’s claims will depend on how Strategy tackles its debt, communicates transparency, and manages any future decisions regarding Bitcoin sales. These actions will reveal whether Saylor's stewardship can endure the current economic pressures.

Featured image from Unsplash, chart from TradingView.