“Strategy is a scam”
“Strategy doesn’t create value—its a ponzi scheme”
“Strategy is a memestock”
“Strategy should be priced at or below its MNAV”
Detractors of MSTR often say it produces no value, that it provides no service or product, and therefore is a Ponzi scheme. This assessment is common even among bitcoiners. Many investors who understand Bitcoin fail to grasp what MSTR is doing, and what its value proposition is beyond being a “leveraged Bitcoin bet.” This essay explores MSTR’s business model, draws parallels between MSTR and its tradfi equivalents to determine reasonable stock price valuation, and discusses MSTR’s share printing.
So, what assumptions are going into all of these statements? And what is the truth of the matter?
What seems certain is the market is uncertain how to properly price Strategy. Let’s put aside any talk of market or stock manipulation by large players, and instead focus on what we think the value of the company is, and what its “worth.”
We won’t attempt to determine its worth independently of the world, instead, we will attempt to determine its worth in the system which it exists in. To do this, we must understand what Strategy is doing, what is most similar to what its doing, and what methods are best for evaluating entities that are doing what is most similar.
Let’s set aside the short-selling of shares which is done in short-term scenarios, and let us do so under the assumption that short-term traders are distinctly different from value investors in that they do not focus on attempting to determine the real value of something, rather, they are interested in sentiment, or in capitalizing on extremes in one direction or another. For the sake of understanding the business model that seems to be developing from Strategy, lets also set aside the company’s sale (issuance) of stock in order to purchase Bitcoin or pay debt obligations which were taken in order to purchase Bitcoin; however, at the end we will add these factors back in.
So, what is Strategy doing? They buy and hold Bitcoin. In order to fund purchases, they issue preferred equity that pays dividends (STRC, STRK, STRF, STRD). These instruments are similar to selling bonds, but allow Strategy to raise capital without hurting their debt-to-equity ratio and provide flexibility in payment schedules. They are perpetual, and their claim on payout is advantaged compared to common-stock holders. The seniority of payout in case of bankruptcy being bondholders → preferred equity holders → common equity holders.
So, we see a model where MSTR is borrowing money, paying interest on the borrowed money, and attempting to use the borrowed money to outperform the interest rates they are paying to borrow it. At first glance, this looks like reckless gambling, or worse, getting duped: investors accept downside risk while forfeiting much of the upside—who would willingly do this?
Lets turn our inquiry to traditional financial banks and ask ourselves what exactly a bank’s business model is.
Banks provide financial services. Specifically, banks act as a trusted third party who hold and keep safe someone’s money while also giving them full access to exchange it for goods and services as needed. But bank accounts don’t cost money. So how is the bank making a profit? Not only are banks not charging for this service, but bank accounts offer money in return for customers depositing their money with them, in the form of interest. While the rates are often negligible in checking accounts, savings accounts can offer anywhere from 1% to currently upwards of 3.5% or 4% interest. So now, not only are banks providing the service of a checking account to customers, allowing them to seamlessly exchange money for goods and services, but they are paying the customer interest on their money to do so. Yet again, we must ask, how do banks turn a profit?
The primary way banks make money is by re-investing deposited capital at higher yields than they pay to depositors. That is, they re-invest the money their customers deposit, and attempt to outperform the interest rate that they pay their customers. So people are lending money to a bank in order to receive interest (as well as the service provided—the access to a checking account and everything that entails), knowing that their money is not kept in the bank, but re-invested into higher risk investments, and under a fractional-reserve system that relies on confidence and liquidity rather than full reserves. If the bank’s investments do well, the banks pay out the promised amount to their customers and pocket the difference.
This brings us back to an earlier question: who would willingly supply capital, accept downside risk, yet claim only a fraction of the upside if the investment succeeds?
The answer, in this instance, seems to be just about everyone. Why? Well, it is the understanding that banks are not reinvesting the deposited (borrowed) money into risky assets. The banks are regulated entities, they have the Federal Reserve acting as a backstop, deposits are usually FDIC insured up to $250,000, and the safe investments they have access to are generally guaranteed, such as short-term T-bills or the discount rate directly from the Federal Reserve.
T-bills and the discount rate are often referred to as “risk-free,” therefore, depositing money in (essentially lending money to) a bank is also “risk-free.” But there is an assumption baked into “risk-free.” These investments are considered “risk-free” because the U.S. has the power to print money to pay its debts, so there is zero chance of default. However, the baked in assumption is that the U.S. dollar will retain its value, for the most part, excluding the 2% or 3% inflation targeted by the Federal Reserve.
This assumption has held up, for the most part (80’s aside), for over 200 years, so perhaps we think it is a safe assumption—but perhaps it would be more accurate to say these investments are “low-risk,” relative to other investments, or “practically risk-free.”
Let’s return to this later.
Strategy operates much like a bank. They take peoples money in a form of deposits, and pay out dividends at a given interest rate, and then take the deposited, or borrowed money, and invest it in Bitcoin. Investors comfortable with traditional banking often object to Strategy’s approach for several reasons: the money is not FDIC insured, the rates at which Strategy is borrowing money are high, making the cost to borrow and so the risk involved in borrowing higher, and also that their choice of investment—Bitcoin—is highly volatile and risky, or lacks intrinsic value or some other critique of this nature. However, the question of Bitcoin’s value is another discussion entirely. While Strategy’s earnings profile differs from traditional spread-based lending, it is functionally the same: leveraged asset transformation funded by yield-bearing liabilities.
If you are contemplating investing in Strategy, you likely already understand the value of Bitcoin, but fail to see Strategy’s strategy. Yes, it is risky because it is historically unproven and untested, but that is also why it is more likely to have a massive payout. We have identified a pattern of business, or the model that Strategy is pursuing, and it is the same model as banks. Whereas banks rely on the Federal Reserve to help them remain solvent, or to create “risk-free” investments for them, Strategy relies on Bitcoin to be a superior asset. In other words, Strategy’s model bets that Bitcoin is a superior collateral base for long-duration capital formation.
The catch is, these two systems are potentially mutually exclusive. Not because fiat currency cannot coexist with Bitcoin, but because it cannot persist indefinitely in its current form alongside it. If Strategy continues to accrete Bitcoin, and pay out 10% dividends without default, their credit rating will eventually improve as they build trust. As their credit rating improves, the yield from their financial vehicles will decrease to adjust for the “reduced” risk. This will allow Strategy to accumulate more dollars at lower rates, and continue to accumulate Bitcoin. As this cycle continues, investors and businesses will have greater and greater incentive to receive higher yields for lower risk by purchasing Strategy’s financial vehicles.
This is where things get interesting. Traditional finance is diametrically opposed to Bitcoin. If there is a higher yield for less risk for buying one of Strategy’s vehicles, then there is a lower yield for greater risk in buying traditional financial vehicles. This is the only potential risk we earlier identified for banks and their business model, and Strategy’s accretion of Bitcoin makes it a reality. Fiat money will still exist, but there will be a repricing of risk and yield.
But we are not making the argument for shorting banks. Banks could adopt new strategies or adapt to the new financial field as it plays out; what we are arguing for is the real valuation of Strategy as a company. And if we assess its value in the same manner we assess the value of a bank, we would look at a few core metrics. Specifically:
1) Price-to-book ratio (P/B): Another way of saying MNAV, this is the current market price per share / book value per share
P/B = Market price per share / ((Total Assets – Total Liabilities) / total # of outstanding shares)
*Generally, a P/B of 1.5 or 2 is an overvalued company, while anything below 1.0 is considered undervalued, or a bargain.
**MSTR P/B = ~.90 as of 11 January 2026
2) Price-to-earnings ratio (P/E): a ratio of how much investors are willing to pay for each dollar of earnings
P/E = Stock price per share / EPS. Or, P/E = Market Cap / Net Income
*Generally, a P/E of 10 to 15 is average for banks, with smaller banks that are experiencing rapid growth often have higher P/E ratios. Large banks PE = 8. Small banks PE = 30
**MSTR P/E = ~ 6 as of 11 January 2026
3) Return on Tangible Common Equity (ROTCE): this metric shows how efficiently a company generates profit from its physical assets
Net Income / Avg Tangible Common Equity = Net Income / (shareholder equity – goodwill, patents, trademarks, brand value, and preferred stock)
*Generally an ROTCE exceeding 10% is widely accepted as a sign of a healthy, well-performing bank
**MSTR ROTCE = 13.2% as of September 2025 (will be updated with next filing)
No metrics are perfect, but these metrics are often used for evaluating functionally identical tradfi companies.
So, is MSTR undervalued or overvalued?
Its ROTCE is sitting strongly above 10%. Its P/E ratio of 6 is below large banks average of 8, and far below small banks whose P/E often ranges in the 30s. Considering small banks generally have higher P/E ratios because of their potential for growth, MSTR is greatly undervalued as a bank that is positioning itself as a major player in the future financial system. Finally, its P/B ratio of .9 similarly shows an undervaluing, or bargain price based on its NAV.
What should the stock price be? To some degree, this is a matter of speculation, but we can look at all of the current metrics for banks and conclude it is currently a strong buy. Further, we can say if it even adjusts to average each of its metrics, its P/B and P/E could double, and it would be sitting in a very healthy range. To double the P/E or P/B would entail a doubling of its current price of $150, to a price of $300, assuming its Bitcoin holdings and current liabilities remain unchanged. Lets keep in mind a price of $300 doesn’t quite capture the novelty of how MSTR is positioning itself for the future—but again, that pricing would be more speculation than real present value, and a topic for another article.
But what of share dilution, which we tabled until establishing the business model of MSTR? Share dilution seems to be for the most part, especially in the manner in which MSTR is doing it, unique to MSTR. What does it mean? What are we to make of it? MSTR diluting shares to buy Bitcoin, resulting in increased BTC / share is a long term strategy that could potentially cause short term fluctuations in stock price. The question then seems to be: if Strategy intends to continuously sell shares to buy Bitcoin, over the long term, then should we not call the “short-term” fluctuations long term fluctuations? This leads us to the root: will MSTR sell shares indefinitely in order to buy Bitcoin?
Perhaps the question is best posed to Michael Saylor, who would upon little reflection, likely say yes. Let’s analyze this a bit. Firstly, the selling of shares that has occurred has had great payoff. It has allowed MSTR to arbitrage an “overvaluation,” or if we don’t believe that’s the case, then at least to rapidly generate capital in order to acquire Bitcoin en mass, earlier than any competition, and secure its position as the front-runner of Bitcoin treasury companies and any new potential financial system that springs from this. So long as BTC/share rises, issuing shares when the market perceives MSTR as overvalued is accretive.
Secondly, derivatives markets essentially enable other actors, outside of the company, to issue shares that don’t exist (by short-selling them), tank the price, and then buy the shares at the lower price to close the short position. In other words, other actors are able to “steal” Strategy’s trade. If Saylor doesn’t make the trade, others will. The difference is when Strategy issues shares and buys Bitcoin with the funds, it increases Bitcoin per share which benefits shareholders, but when other actors do it, the arbitrage only benefits those outside actors, and even harms shareholders. In this sense, it is a defensive and necessary play to issue shares when the market believes Strategy is “overvalued.”
Thirdly, as time goes on there are diminishing returns on share sales of stock for Bitcoin. Strategy has acquired a sizeable Bitcoin position, and is able to continue to leverage that in creation of other financial vehicles and debt instruments that allow Strategy to accumulate Bitcoin without dilution. The expectation Bitcoiners hold is that eventually Bitcoin will run away. It will approach some asymptote and people will no longer be able to buy it with fiat money. Instead, people will have to work to earn Bitcoin. Clearly, selling shares to buy Bitcoin at such a point in time would no longer be viable. And it would likely stop being viable long beforehand as well, when Strategy has no need, and its market cap exceeds a certain amount that makes it too risky to short in the same manner as has been done in the past two Bitcoin cycles. As it becomes riskier to steal Saylor’s trade of stock for Bitcoin, fewer players will do it. When players stop shorting MSTR, the issuing of shares becomes no longer necessary and defensive for Saylor; it becomes optional, and at that point, Saylor is likely to let the stock run because he gains access to the greatest amount of capital by letting it do so.
Strategy is not a memestock or Ponzi scheme. It is a bank using an unconventional reserve asset. The only question worth asking is whether Bitcoin is a superior base layer to the fiat system that we currently trust—well, that some people currently trust.