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Veteran investor Ross Gerber warned on Monday that Strategy Inc.’s (NASDAQ:MSTR) leveraged Bitcoin (CRYPTO: BTC) exposure could spell disaster for the company.
In an X post, Gerber expressed skepticism over Strategy’s business model, stating that it is all about survival right now for the Bitcoin hoarder.
Leverage on risk is a strategy that can lead to disaster. Are they fit enough to survive…,” the CEO of Gerber Kawasaki Wealth and Investment Management said.
See Also: Bitcoin (BTC) Price Predictions: 2025, 2026, 2030
The MSTR stock is often seen as a leveraged Bitcoin proxy due to its recursive strategy of issuing equity and debt to acquire more BTC as its price rises.
Gerber's concerns mirrored those expressed by economist Peter Schiff, who accused Strategy of running an unsustainable business model, alleging that the company was forced to sell stock to cover interest and dividend obligations.
These remarks were made in the wake of Strategy’s announcement of a $1.44 billion reserve, aimed at funding dividends and interest without relying on Bitcoin sales during downturns.
Strategy Chair Michael Saylor said the company can raise cash for dividends by selling a small portion of its Bitcoin or using derivatives.
The reserve announcement comes amid a significant slump in Bitcoin's value, which has severely impacted Strategy's stock. The company currently holds 650,000 BTC at an average price of $74,433. This means that if Bitcoin falls another 14% from its current price, Strategy's position will turn red.
Saylor previously said that Strategy is "engineered" to endure an 80 to 90% drawdown and continue operating, describing its capital structure as “extremely robust.”
Price Action: At the time of writing, BTC was exchanging hands at $86,462.25, down 1.01% in the last 24 hours, according to data from Benzinga Pro.
Strategy shares rose 0.99% in after-hours trading to $173.12. The stock closed 3.25% lower at $171.42 during Monday’s regular trading session.
The stock maintains a weaker price trend over the short, medium and long terms. How does it compare with other Bitcoin treasury companies, such as American Bitcoin Corp. (NASDAQ:ABTC)? Visit Benzinga Edge Stock Rankings to find out.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
