key points
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The strategy, formerly known as MicroStrategy, buys Bitcoin by issuing equity and borrowing through convertible bonds.
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When trading at a premium to its underlying crypto holdings, the strategy may deliver better returns than Bitcoin.
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The strategy is only worth considering if you are bullish on Bitcoin and have a high risk tolerance.
Originally a software company, strategy (NASDAQ: MSTR), formerly known as MicroStrategy, is now almost exclusively a Bitcoin (Crypto: BTC) Treasury Company. The software business generated revenue of only $124 million in the first quarter of 2026. On the other hand, the 843,738 BTC it has accumulated is worth about $65 billion (as of May 19).
Loans are one of the ways the strategy purchases Bitcoin, making it a leveraged Bitcoin investment. This approach has been criticized, but has produced positive results. Over the past five years, the strategy has outperformed Bitcoin by a large margin, returning 262% compared to 79% for Bitcoin.
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Whether the strategy is a good investment today depends mainly on your risk tolerance.
Strategy logo on orange background.
Image source: The Motley Fool.
How does the strategy work?
The strategy’s executive chairman, Michael Saylor, developed a complex financial engineering strategy to accumulate as much Bitcoin as possible. When the strategy trades at a premium to the value of its underlying Bitcoins, it can issue new shares to buy more Bitcoins. Shareholders get diluted, but the idea is that purchasing Bitcoin adds value more than the cost of dilution.
When the strategy trades near or below the value of its Bitcoin holdings, as it did for most of 2026, it may issue preferred shares under different tickers. It issues four types of preferred shares that provide predictable income to shareholders. Three preferred stocks pay fixed dividends ranging from 8% to 10%. Second, DragPays a variable dividend of 11.5%, which is significantly higher than most dividend stock Salary.
Strategy has also been released convertible bondsAnd its long-term convertible debt due Q1 2026 was $8.2 billion. However, with an annual interest expense of $34.6 million, the costs of this loan are minimal.
The strategy will also buy back a portion of this debt at a discount. On May 14, it told the SEC that it would repurchase approximately $1.5 billion of its 2029 notes at a price of approximately $1.38 billion.
Is the strategy worth the risk?
The success of the strategy largely depends on the company’s Bitcoin holdings trading at a premium. When the strategy’s premium increases, it can effectively multiply any profits provided by Bitcoin.
But that premium fluctuates depending on market sentiment toward cryptocurrencies and Saylor’s financial engineering. Since the peak of more than tripling the value of Bitcoin holdings in November 2024, the strategy’s premium has declined, especially when the crypto went into a bear market last year.
If you’re excited about Bitcoin, the safest option is to invest directly in the cryptocurrency. And if you want any investments you can buy through a brokerage account, strategy is no longer the only game in town, as there are plenty of bitcoin etf Available.
For those with a higher risk tolerance, it may be worth considering a short position in the strategy. If Bitcoin goes on another bull run, we could see a similar pattern in which the strategy’s premium spread widens and it delivers massive returns. Just keep in mind that the strategy is even more volatile than Bitcoin, so investing in it can be a risky proposition.
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Lyle Daly Bitcoin has positions. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has one Disclosure Policy.