Strategy’s Twin Headaches: A Dividend Spiral and an Index Identity Crisis

Strategy Inc stock drops 57% from highs as critics warn of unsustainable dividends, dilution fears, and potential ejection from tech indices amid Bitcoin-heavy balance sheet.

The tension surrounding Strategy Inc is building from two directions at once. As the company barrels toward its first-quarter earnings release on May 5, investors are wrestling with a financing model that critics call unsustainable and an index classification that could soon shift beneath its feet. The stock is caught in the middle, down 3.5 percent on the day to €139.32, and trading nearly 57 percent below its 52-week high of around €392.

The Dividend Debate Heats Up

Economist Peter Schiff has trained his fire on Strategy’s preferred share program, specifically the STRC series that launched in July 2025 with a nine percent dividend yield. That payout has since ballooned to 11.5 percent, and Schiff warns the company is trapped in a downward spiral. He argues that Strategy will eventually be forced to either sell Bitcoin or perpetually find new buyers for the preferred shares to meet its obligations.

Strategy’s leadership pushes back hard. CEO Phong Le rejects any comparison to a Ponzi scheme, insisting the dividends are funded separately — primarily through the issuance of new common stock. Executive Chairman Michael Saylor adds his own arithmetic: Bitcoin needs to appreciate only about two percent annually to cover the STRC commitments. Schiff dismisses that premise as wishful thinking.

The market dynamics are already shifting. STRC preferred shares have slipped below their par value, making further issuance difficult. Strategy has responded by leaning more heavily on common stock sales. The company bought another 3,273 Bitcoin in late April, pushing its total holdings past 818,000, and paid for the tranche by selling regular shares. That has stoked fears of dilution among common stockholders.

An Index Question Looms

Beyond the dividend controversy, a structural threat is taking shape. Strategy currently holds a market capitalization of roughly $60 billion, ranking it 279th among the largest US-listed companies. It remains in the Nasdaq 100 for now, but the index is due for a June rebalancing — and the company’s classification is under review.

The problem is one of identity. Strategy is officially an enterprise analytics software provider, but in practice it functions as a Bitcoin treasury company. Index providers like MSCI are examining how to categorize so-called “Digital Asset Treasury Companies” — firms that hold the bulk of their assets in cryptocurrency. If reclassified, Strategy could be ejected from technology indices. The company argues that its Bitcoin holdings are an integral part of its business model, not a passive investment, and that distinction has so far preserved its tech-sector status.

The valuation picture doesn’t help. Strategy trades at a price-to-sales ratio of roughly 106, and its price-to-earnings ratio is negative — the company is posting losses. For index providers tightening their admission criteria, that is an uncomfortable combination.

The ATM Machine Keeps Running

SEC filings from April 27 show that Strategy continues to tap its at-the-market offering program aggressively. The remaining capacity for equity sales — across common stock and multiple preferred share classes — stands at about $26.5 billion. That gives the company enormous firepower for further Bitcoin purchases or to fund its software operations.

The stock has rallied more than 57 percent from its February low near €90, but remains a long way from its highs. Wall Street is still broadly bullish: Cantor Fitzgerald recently lifted its price target from $192 to $212 and maintains an overweight rating. The consensus among analysts leans toward buy.

What the Numbers Will Reveal

When Strategy reports first-quarter results after the closing bell on May 5, followed by a management webcast, the focus will be less on headline earnings and more on the mechanics beneath them. The company has already flagged billions in unrealized losses on digital assets, offset by a large deferred tax benefit. What investors really want to see are the precise costs of the preferred share program and the full extent of the recent equity dilution.

The index question adds another layer of uncertainty. With the Nasdaq 100 rebalancing in June and MSCI’s classification review underway, the May 5 earnings call will be Strategy’s best chance to make its case — to both index providers and a skeptical market — that its Bitcoin-centric model deserves a permanent place in the mainstream.