Bitcoin Capital Manipulation: MicroStrategy's Premium Issuance and Investment Strategy

1. Introduction

A company that originally focused on business intelligence solutions shifted its focus to Bitcoin investment starting in 2020. The company raised funds by issuing stocks and convertible bonds to purchase Bitcoin, becoming a focal point in the U.S. stock market. On February 6, 2025, the company officially changed its name to Strategy, at which time it held 471,107 Bitcoins, accounting for approximately 2% of the total global Bitcoin supply. By February 21, 2025, the company had accumulated nearly 500,000 Bitcoins, valued at over $40 billion.

This company essentially transforms the stock market into a Bitcoin ATM through capital structure design—raising funds to increase Bitcoin holdings by issuing new shares/convertible bonds, and then using the Bitcoin holdings to support the stock price valuation, creating a capital closed loop deeply tied to crypto assets. With this unique high-premium financing mechanism of U.S. stocks, the company not only stands out among Bitcoin concept stocks but has also developed a "alchemy" certified by the U.S. stock market through equity issuance and coin price manipulation.

2. The "Magnet" of Stock Price Speculation

The company's financing method is very clever, primarily completed through a combination of stocks and bonds to raise funds. In the initial stage, it relied on issuing bonds and its own cash reserves, and even some common stocks and convertible bonds. The downside of issuing ordinary bonds is the need to pay interest, but at that time its cash flow was still good, with the software business generating tens of millions of dollars in positive cash flow, sufficient to cover the interest on these debts.

In this cycle, the company has made extensive use of the ATM (At-the-market) stock issuance mechanism to sell shares directly in the secondary market. By combining stock issuance and bond issuance strategies, it plays the "alchemy" of the capital market. When the leverage ratio is low, it quickly raises funds by issuing stocks to buy Bitcoin, thereby increasing leverage and enhancing its valuation premium when Bitcoin rises. During the bull market, its premium once reached as high as 300%.

As time goes by, the market gradually perceives that the company is selling off a large number of stocks, leading to a decline in stock prices and a corresponding reduction in premiums. At the same time, the leverage ratio decreases, and the company gradually shifts to a financing method primarily based on bond issuance. With this change, the company's pace of buying Bitcoin slows down, resulting in a weakening demand for Bitcoin in the market.

Overall, the company uses different financing strategies in different cycles, taking advantage of the high premium in the stock market while steadily leveraging through bonds. For Bitcoin, the company's slower pace may indicate a weakening of the upward momentum for Bitcoin in the short term; for the company, this diversified financing approach allows it to respond flexibly in different market environments.

3. "Holding Bitcoin, Never Selling": A Crypto Holy War

The past wave of Bitcoin promotion by the founder of the company has had a profound impact on the entire Bitcoin industry. By continuously appearing in public, giving interviews, and making speeches, he not only brought Bitcoin into the spotlight but also attracted a large number of institutional investors into the market. It can even be said that the company and ETFs are currently the two main buyers in the Bitcoin market. The interesting thing is that while ETFs are very important, the company's operations are more eye-catching in comparison, as the company only buys and does not sell, whereas ETFs occasionally sell some off.

The founder is not only a strong proponent of Bitcoin, but to some extent, he is even more extreme than some early Bitcoin investors. Long before the appearance of the ETF, he shaped the company into an existence similar to a Bitcoin ETF, and his dialogue with Musk has brought a crucial impetus to Bitcoin investment. According to market rumors, the reason Musk decided to have Tesla purchase Bitcoin was largely due to the founder's suggestion.

The founder is not limited to Bitcoin. Some people in the market believe that his latest remarks indicate his support for the development of the entire digital economy, suggesting that the U.S. should become the global leader in the digital economy and promote the on-chain tokenization of all assets. He is no longer just a Bitcoin extremist, but has recognized the potential of blockchain technology in various fields. This open attitude has also garnered him more recognition in the blockchain industry.

4. Möbius Loop, Asset Game

Currently, the price of Bitcoin has dropped to around $87,000 from a high point, while the company's holding cost is approximately $66,000. This raises the question: what will happen in the market if the price of Bitcoin falls below the company's purchase cost?

During the last bear market, the company's situation was even worse than it is now. At that time, their net assets had already turned negative, which is a very rare situation for any company. Although some companies may experience negative net assets under special circumstances (for example, due to granting a large number of stock options), generally speaking, negative net assets can easily trigger market panic. However, the company did not go into liquidation at that time, nor were they forced to sell Bitcoin, mainly because their debt maturity was still far off, and no one could force them into immediate liquidation.

The founder almost holds 48% of the voting rights, which makes it very difficult for anyone to propose liquidation. Therefore, even in the case of the company's financial difficulties, creditors and shareholders cannot easily demand liquidation.

The company has some flexible means to cope with market fluctuations. For example, they can choose to issue bonds, increase stock issuance, or even use the Bitcoin they hold as collateral to borrow money. The company currently holds approximately $40 billion in Bitcoin, which means they can use these Bitcoins as collateral to obtain funds. Even if the price falls, they can avoid being forced to sell by adding more collateral.

Moreover, their main debt is not due until 2028 at the earliest, and no one can force them to make unfavorable decisions before that. For the time being, even if the price of Bitcoin fluctuates, the company will not immediately face significant financial pressure, nor is it likely to be forced to sell Bitcoin.

5. Wealth Engine Or Crypto Frost?

The company appears to be a software company focused on commercial data analysis, but in reality, its operating model has completely shifted to Bitcoin asset accumulation. Its stock has a leverage effect. Because the company holds a large amount of BTC and may increase its holdings through borrowing or issuing bonds, this amplifies the sensitivity of its stock price to Bitcoin price fluctuations. When BTC rises, the stock price may increase even more significantly, and vice versa.

The company's current Bitcoin investment returns far exceed the revenue from its traditional business. Although its software business revenue has basically not grown in the past few years and has even declined, the company has raised funds to purchase more Bitcoin by continuously issuing bonds and diluting equity, resulting in an overall profit increase. The company has deeply tied its stock to Bitcoin; this operation has benefits but also brings certain risks, as the core business cannot generate significant profits, and all prospects are reliant on the price increase of Bitcoin.

The company further boosted its financing capabilities by issuing non-interest convertible notes. These notes allow investors to convert them into company equity in the future, but the conversion price is much higher than the current stock price. On the surface, this seems like an unfavorable deal for investors, but in reality, note holders enjoy priority liquidation rights, which can reduce risk. Meanwhile, the company can continue to accumulate Bitcoin through this financing method, driving up both its stock and Bitcoin prices.

The clever point of this approach lies in its successful transfer of risk from the company itself to the stock market, by issuing convertible bonds for financing, and then using that money to buy Bitcoin. When the debt matures, if the company's stock price is high enough, creditors will choose to convert the debt into equity instead of demanding repayment from the company. This way, the debt issue can be completely transferred to the stock market, making the overall odds of long and short positions in the stock market greater than those in the crypto market.