Strategy (MSTR) closed last week at about $82, down approximately 47% year-to-date pushing the company’s so-called enterprise mNAV below the bitcoin value on its balance sheet for the first time. The enterprise mNAV, the ratio of Strategy’s equity market cap, debt, total perpetual preferred stock and cash reserve to the spot value of its bitcoin, has compressed below 1.0x.

The core Bitcoin accumulation model Strategy built over the past six years depends on the ratio staying above 1. When the ratio is above 1, the company can issue shares and deploy the proceeds to buy enough bitcoin to lift the bitcoin-per-share metric for existing holders. Issuing shares to accumulate Bitcoin, however, becomes dilutive when the ratio falls below 1.

This story is an excerpt from the Unchained Daily newsletter.

The decline of Strategy’s enterprise mNAV below 1 comes as the company’s STRC preferred stock, which has become its Bitcoin accumulation engine of choice, has recently faced significant pressure. STRC closed last week below $75, nearly 26% below its $100 par value at which Strategy can issue shares to fund Bitcoin purchases. With STRC below par, the preferred tap is also effectively closed for Strategy.

Amid MSTR and STRC’s market movements, concerns about the sustainability of Strategy’s business model have grown. There is also the matter of the company’s dividend obligations, which have nearly sextupled from roughly $300 million at the start of the year to an estimated $1.7 billion across its five preferred share classes (STRC, STRK, STRF, STRD, and STRE).

“What’s breaking is the funding model, not the balance sheet,” Onramp Bitcoin institutional chief Glenn Cameron told Unchained. “STRC was the cheapest way to raise money and buy bitcoin, and the company’s own rule is they only sell it above par. Below par, that engine is off, and it’s off right now.”

Cameron said Strategy is left funding more than $1.7 billion a year in preferred dividends by either diluting common stock at a discount to its own bitcoin, draining its now $1.4 billion cash reserve or selling bitcoin.

“They’ve started doing all three,” he said. “None of those is the promised flywheel. They’re the flywheel in reverse.”

Cameron also pointed to a risk fewer analysts have focused on: the convertible note wall in 2028. With MSTR at $85, every convertible note is deep out of the money. The lowest conversion price is around $150, meaning none of the converts will exchange into stock at current prices. Instead they become cash obligations.

“Holders can put roughly $4.5 billion back at par by mid-2028 and close to $6 billion by that September,” he said. “The danger isn’t any single event. It’s that the convertible wall, the rising preferred dividend, and a shut STRC channel all pull on the same string at the same time, and the only option left is sell the bitcoin.”

According to Cameron, the only way out for Strategy is for Bitcoin to go up.

Meanwhile, other market watchers such as Grayscale Head of Research Zach Pandl have called for the company to focus on rebuilding its cash reserves in the meantime. Pandl suggested on Saturday on X that the company sell over $3 billion in Bitcoin, which could cover dividend obligations for about two years.

However, Strategy may be gearing up to announce the opposite. Strategy Chair Michael Saylor on Sunday on X hinted at the company announcing a new Bitcoin purchase.

“We’re gonna need more charts,” he said, sharing a chart tracking past bitcoin purchases.

Strategy holds 847,363 BTC, according to its last disclosure, including over 3,000 BTC purchased this month.

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