Strategy Inc. (Nasdaq: MSTR) is touting a 42% annualized return since adopting Bitcoin as its primary treasury reserve in August 2020, a claim that puts its stock performance ahead of Bitcoin itself, the Magnificent Seven, and the S&P 500 over the same period. But there's a catch: the company's Bitcoin holdings are currently underwater, meaning the market value of its stash sits below the original purchase price.
The 42% claim
Executive Chairman Michael Saylor made the statement, pointing to the stock's performance since the company shifted its treasury strategy to Bitcoin. Over that nearly six-year stretch, MSTR has outpaced the very asset it holds, as well as the tech-heavy Magnificent Seven and the broader S&P 500. The claim is striking — especially given the current state of the company's Bitcoin book.
Underwater but undeterred
Despite the strong stock performance, Strategy's Bitcoin treasury is currently in the red. The market value of its holdings is below what the company paid. That's a familiar position for Saylor's firm, which has weathered previous drawdowns and continued to buy. The timing of the statement — right as the holdings are underwater — isn't lost on observers. Saylor didn't address the underwater position directly in the statement, instead focusing on the stock's long-term trajectory.
The math behind the paradox
How can a stock outperform when its primary asset is down? The answer likely lies in the premium investors have placed on MSTR shares, which trade like a leveraged play on Bitcoin. The company has also issued convertible notes and used other financial engineering to accumulate more Bitcoin. The result: even when Bitcoin dips, the stock can still show gains over a multiyear window. But the gap between the stock's return and the Bitcoin price is narrowing as the market reassesses that premium.
The company's next quarterly report will give investors an updated look at its Bitcoin holdings, any impairment charges, and whether Saylor has added to the stack. For now, the firm is sticking with its strategy — and making sure everyone knows the stock has been a winner, even if the Bitcoin itself hasn't been lately.
