Strategy Stock Is Essentially Leveraged Bitcoin -- Here's Whether That's Worth the Risk
Key Points
Strategy, formerly known as MicroStrategy, buys Bitcoin by issuing equity and borrowing through convertible bonds.
When trading at a premium to its underlying crypto holdings, Strategy can deliver superior returns compared to Bitcoin.
Strategy is only worth considering if you're bullish on Bitcoin and have a high risk tolerance.
- 10 stocks we like better than Strategy ›
Originally a software company, Strategy (NASDAQ: MSTR), formerly known as MicroStrategy, is now almost entirely a Bitcoin (CRYPTO: BTC) treasury company. The software business generated just $124 million of revenue in the first quarter of 2026. The 843,738 BTC it has accumulated, on the other hand, are worth about $65 billion (as of May 19).
Debt is one of the ways Strategy buys Bitcoin, making it a leveraged Bitcoin investment. The approach has drawn criticism, but it has delivered positive results. Over the last five years, Strategy has outperformed Bitcoin by a wide margin, with returns of 262% compared to 79% for Bitcoin.
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Whether Strategy is a good investment today depends primarily on your risk tolerance.
Image source: The Motley Fool.
How Strategy works
Michael Saylor, executive chairman of Strategy, developed a complex financial engineering strategy to accumulate as much Bitcoin as possible. When Strategy trades at a premium to the value of its underlying Bitcoin, it can issue new shares to buy more Bitcoin. Shareholders get diluted, but the idea is that the Bitcoin purchase adds more value than the dilution costs.
When Strategy trades near or below the value of its Bitcoin holdings, as it has for most of 2026, it can issue preferred shares under different tickers. It issues four types of preferred shares that offer shareholders predictable income. Three preferred stocks pay fixed dividends ranging from 8% to 10%. The other, Stretch, pays a variable dividend of 11.5%, significantly higher than most dividend stocks pay.
Strategy has also issued convertible bonds, and it had $8.2 billion in long-term convertible debt as of Q1 2026. However, the cost of this debt is minimal, with annualized interest expenses of $34.6 million.
Strategy will also buy back a chunk of this debt at a discount. On May 14, it reported to the SEC that it would repurchase approximately $1.5 billion of its 2029 notes at a price of approximately $1.38 billion.
Is Strategy worth the risk?
Strategy's success primarily depends on the company trading at a premium to its Bitcoin holdings. When Strategy's premium expands, it can effectively multiply any gains Bitcoin delivers.
But that premium fluctuates based on market sentiment toward cryptocurrency and Saylor's financial engineering. Since peaking in November 2024 at over three times the value of its Bitcoin holdings, Strategy's premium has compressed, especially as crypto went into a bear market last year.
If you're bullish on Bitcoin, the safest option is to invest directly in the cryptocurrency. And if you want an investment you can buy through a brokerage account, Strategy's no longer the only game in town, as there are plenty of Bitcoin ETFs available.
For those with a high risk tolerance, a small position in Strategy could be worth considering. If Bitcoin goes on another bull run, we could see a similar pattern in which Strategy's premium expands and it delivers outsized returns. Just keep in mind that Strategy is even more volatile than Bitcoin, so investing in it can be a wild ride.
Should you buy stock in Strategy right now?
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Lyle Daly has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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