Key Takeaways:
- S&P Global Ratings assigned a “B- issuer credit rating with a stable outlook” to Strategy Inc, highlighting the firm’s high bitcoin exposure and narrow business model as major risks.
- The company’s risk-adjusted capital was deemed significantly negative due to its bitcoin-heavy balance sheet, which offers no operating cash flow and exposes it to currency mismatch.
- Strategy Inc plans to meet its debt and preferred dividend obligations through capital raises, a method S&P warns could falter if market access is disrupted during a bitcoin downturn.
- S&P said an upgrade is unlikely in the near term, citing liquidity risks and dependence on convertible debt, though improved dollar liquidity and resilience during crypto stress could eventually support a rating lift.
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S&P Global Ratings on Monday assigned a “B- issuer credit rating with a stable outlook” to Strategy Inc, formerly known as MicroStrategy, citing the company’s high exposure to bitcoin and narrow business focus as key risks.
Strategy Inc, which has repositioned itself as a bitcoin accumulation vehicle and is known as the world’s largest corporate holder of the cryptocurrency, funds its purchases through a mix of debt, preferred equity, and common stock issuances. It also operates a relatively small software business focused on AI-powered enterprise analytics.
According to the rating agency, Strategy’s “narrow business focus, high bitcoin concentration, low U.S. dollar liquidity, and very weak risk-adjusted capital” are key weaknesses. However, these risks are partly mitigated by the firm’s consistent access to capital markets and careful maturity management, including no near-term debt repayments.
Despite the ‘B-’ rating, S&P assigned a stable outlook to Strategy, reflecting confidence in the company’s ability to manage upcoming debt maturities. The agency said it expects Strategy to continue financing its preferred dividend payments and debt obligations through new issuances of equity and debt.
Why the Rating Matters Now: Bitcoin-Focused Model Under Review
The rating comes amid growing investor interest in bitcoin-linked securities, with Strategy offering exposure through various instruments, including convertible debt and preferred shares.
However, the company’s concentration in bitcoin is central to its strategy and “will likely continue to weigh on our ratings,” S&P said.
The agency added that the approach “creates an inherent currency mismatch: The company has a long bitcoin position and a short U.S. dollar position. Debt maturities, interest on the company’s debt, and dividends on its preferred securities are all due in dollars, while Strategy holds mostly bitcoin.”
The Rating in Numbers: $8.1 Billion in Bitcoin Gains, But Negative Cash Flow
According to the agency, As of June 30, Strategy’s risk-adjusted capital ratio was deeply negative. S&P calculates this by deducting bitcoin assets from equity due to the cryptocurrency’s “significant market risk that is uncorrelated to traditional market risks.”
In the first half of 2025, Strategy posted $8.1 billion in pre-tax earnings, entirely from bitcoin appreciation, while cash flow from operations was negative $37 million. Additionally, the software unit contributed negligible earnings and no positive cash flow.
Furthermore, the company holds roughly $70 billion in bitcoin, against $8 billion in convertible debt, most of which matures beginning in 2028.
S&P noted “there is a risk that the convertible debt will become due at the same time as a severe bitcoin stress, leading to liquidation of the company’s bitcoin at depressed prices or a restructuring of its convertible debt or preferred equity that we would consider tantamount to default.”
Strategy’s preferred dividend obligations total about $640 million a year. S&P said the company “can defer dividends on all four tranches of its preferred equity,” but “does not intend to defer dividends,” given the disincentives built into its capital structure.
The agency explained that “two of those classes (Strife and Strike) each entitle preferred equity holders to a board seat if dividends are deferred for four consecutive quarters and an additional board seat if dividends on the applicable class are deferred for eight consecutive quarters.”
While Strategy continues to benefit from a strong equity valuation, with its market cap estimated at $80 billion, S&P cautioned that a loss of market access, especially during a bitcoin downturn, could strain liquidity.
The agency concluded that an upgrade appears unlikely within the next 12 months, warning that downward pressure could emerge if capital market access deteriorates or if the company struggles to manage out-of-the-money debt maturities.
We could raise the rating over time if dollar liquidity improves, the firm reduces reliance on convertible debt, and demonstrates capital markets access during bitcoin stress,” S&P noted.
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