Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
S&P Global has assigned a B- issuer credit rating to Strategy (NASDAQ: MSTR), the company renowned for its significant bitcoin treasury holdings. The rating, considered “speculation grade,” reflects the firm’s concerns regarding Strategy’s concentrated bitcoin exposure, narrow business focus, limited U.S. dollar liquidity, and weak risk-adjusted capital. This assessment, detailed in a report issued Monday, October 27, 2025, could potentially open Strategy to new avenues of capital investment from high-risk, high-yield credit funds.
S&P’s Rationale for the Rating
S&P Global highlighted several factors contributing to the B- rating. The firm stated that its ratings on Strategy incorporate its view of the company’s narrow business focus, high bitcoin concentration, low U.S. dollar liquidity, and very weak risk-adjusted capital. These factors are only partially offset by Strategy’s strong access to capital markets and prudent management of its capital structure.
Strategy’s business model primarily involves acquiring and holding bitcoin as a reserve asset, funded through equity and debt issuance. While this offers investors indirect exposure to bitcoin, S&P views the high concentration in the volatile cryptocurrency as a significant risk. The company also operates a smaller, roughly breakeven software analytics business, but its bitcoin concentration continues to dominate its credit profile.
Currency Mismatch and Liquidity Concerns
A key concern for S&P is the “currency mismatch” in Strategy’s financial structure. The company’s debt and dividend obligations are payable in U.S. dollars, whereas its primary assets are denominated in bitcoin. This creates potential liquidity strain if bitcoin prices experience a sustained downturn, potentially forcing Strategy to sell assets at depressed values.
Risk-Adjusted Capital and Cash Flow
The ratings agency also noted Strategy’s “significantly negative” risk-adjusted capital (RAC) ratio as of June 30, 2025. S&P calculates this by deducting bitcoin holdings from equity value due to the cryptocurrency’s substantial market risk. Furthermore, Strategy’s cash flow was negative $37 million in the first half of 2025, with most pre-tax earnings originating from unrealized gains on its bitcoin treasury, which S&P expects to remain unchanged as the assets “do not generate cash flows.”
Capital Structure and Debt Obligations
Strategy currently holds approximately $8 billion in convertible debt, with $5 billion presently out of the money and significant maturities beginning in 2028. S&P warned that falling bitcoin prices before these maturities could lead to liquidity pressures, potentially necessitating asset sales or debt restructuring. Despite these concerns, S&P acknowledged Strategy’s history of managing debt prudently and noted that its bitcoin holdings—valued at over $73 billion—substantially exceed its debt obligations.
Preferred Dividends and Future Outlook
The company also faces $640 million in annual preferred dividends, which it plans to fund via at-the-market equity sales. S&P noted that deferring these dividends could grant preferred holders board representation or higher rates, incentivizing continued payments. Looking ahead, S&P indicated that a sharp decline in bitcoin prices or weakened access to capital markets could lead to a downgrade. Conversely, a higher rating would require stronger dollar liquidity, reduced reliance on convertible debt, and proof of capital markets access even under bitcoin price stress.
Summary
S&P Global’s B- rating for Strategy underscores the inherent risks associated with its bitcoin-centric treasury strategy. The assessment highlights the challenges of managing a balance sheet heavily weighted in a volatile asset, particularly concerning liquidity, debt obligations, and capital structure. The company’s future rating trajectory will largely depend on bitcoin price stability and its continued access to capital markets.
