By late last week, the sudden drop in Bitcoin’s price was crushing shares of Strategy, controlled by the signature crypto currency’s most famous champion and beneficiary, Michael Saylor. What has gone mainly unnoticed: Strategy’s still selling at a big premium to the underlying value of its assets, almost entirely parked in Bitcoin, less the multiple-billions it effectively owes to borrowers and holders of its preferred stock. That extra lift appears to be a vestige of Saylor’s past sorcery in getting his stock’s value racing far faster than the price of Bitcoin, a dynamic that enabled him to keep raising the tokens investors “owned” per share in a kind of magical “accretion” game.

But that wizardry disappeared months ago as the scenario flipped and Strategy shares tumbled at a pace multiple times the retreat for the coins that are practically its sole holding. Hence, it’s something of a mystery that investors are still paying way more for Strategy shares than what it would reap by selling all of its assets, and paying off its liabilities and preferred shares. Put simply, if the Saylor boost disappears, Strategy’s stock would fall way below where it sits today. It’s the Michael Saylor math problem that practically no one’s talking about.

Strategy holds 844,000 Bitcoin, worth $51.1 billion at today’s quote of $60,500. Strategy also operates a software franchise that was its prime business before Saylor started buying crypto in Q3 of 2020. In 2025, it garnered just $477 million in revenue and lost roughly $40 million. Its sales are stuck at the levels of late 2010s. So it’s more than fair to give software the same value it enjoyed then, around $1.5 billion. In addition, Strategy has disclosed that it harbors around $1 billion in cash, actually a dangerously low amount, but still a plus on the balance sheet. All told, Strategy’s salable and liquid assets total approximately $53.6 billion (the $51.1 billion in Bitcoin plus $1.5 billion for the software legacy arm, and $1 billion in cash).

If Strategy were to liquidate, how much of the proceeds would go to the common shareholders? In a filing issued on May 16, Strategy stated that it held $6.7 billion in debt, all in convertible bonds. It further disclosed that it had capitalized on a drop in the bonds’ prices to repurchase converts at an 8% discount on the open market. So we’ll take 8% off the issue price of the $6.7 billion to reflect where they’re trading, and conclude that Strategy owes a total of just under $6.2 billion. The big one is preferred stock, a source for buying Bitcoin that Saylor’s been gorging on since early 2025. The same document reveals that Strategy’s got $15.5 billion outstanding in that security. Though it’s officially equity, preferred stock is funding extended by “creditors” that a company needs to repay before it can return cash to common shareholders. The net they would receive, then, is the $53.6 billion for the assets, minus the total of $21.8 billion in debt and preferred stock. That net number is $31.8 billion.

It’s hard to see why Strategy’s stock should be selling for more than what would go to the folks and funds that own its stock if it unloaded all it owns, its Bitcoin cache and software arm, and used the proceeds to repay what it owes. But on June 5, Strategy’s market cap, representing the value for common shareholders, was $41.6 billion, $10 billion more than what appears to be its bedrock worth. Somehow, despite Strategy’s travails, the Saylor Magic Premium’s got legs, and now stands tall at an astounding 31% (the $41.6 billion cap divided by its fundamental “net asset value” of $31.8 billion).

Saylor has used preferred stock to dangerously leverage Strategy to Bitcoin’s price

Until the start of 2025, Saylor shrewdly restrained Strategy’s leverage by relying on his high-flying stock to amass Bitcoin. Even early last year, the company had $6.2 billion in bonds outstanding and $730 million in preferred stock, so it effectively “owed” just $6.9 billion. Since then, that number has mushroomed over threefold to the current $21.8 billion. Accounting for virtually all that increase is the ramp of around $15 billion in preferred stock offerings.

By “borrowing” so heavily to buy Bitcoin—and by the way, Strategy paid over $100,000 a coin on average last year—Saylor has magnified the percentage fall in his share price for every like decrease in Bitcoin. For example, if Bitcoin falls to $50,000, or 17% from today’s level of around $60,000, Strategy’s fundamental value would drop to roughly $23 billion (over $44 billion in Bitcoin, cash, and software minus the $21.8 billion in debt and preferreds).

Where would that put the stock price? Here’s where its second major math problem starts to bite big-time, and it’s stupendous dilution. Since it started purchasing Bitcoin, Saylor’s taken the share count from 98 million to 353 million, a jump of 3.5x, or 250%. That’s eight times the 30% increase posted by the second-ranked large market cap player for growing its stock outstanding, furniture-retailer Wayfair.

At $50,000 Bitcoin, Strategy’s shares, by the basics, should sell at $63, its $22.4 billion net asset value for common shareholders, divided by the immense float of 353 million shares. The 17% fall in Bitcoin would trigger a 46% drop in Strategy from today’s $117.

Careful readers will note that I made an important new assumption: I forecast that the Saylor Magic Premium disappears. In fact, it wouldn’t be surprising to see Strategy sell at a discount. The reason: Saylor has made Strategy a far dicier bet since it’s now paying $1.5 billion a year in dividends on the preferred, where it was out just $35 million annually when relying on convertible bonds. Its cash hoard of $1 billion will cover less than a year of those payments. It would appear that Saylor’s only option is issuing more preferreds, further raising its annual cash outflow. The ever mounting payments funded by still more issuance of preferred shares threaten a death spiral.

That leads us to another reason the Saylor Magic Premium should probably go negative. In early June, Saylor famously sold $3.2 million in Bitcoin to help pay a preferred stock dividend, violating his “no sales ever” pledge. Investors hated the move, sending shares sharply lower. Saylor is a big supporter of Bitcoin prices. He seems to make a big buy every time the token drops in an effort to reassure the market. If the greatest name in crypto flips and starts dumping coins big-time, he’d likely shock the Bitcoin believers and cause a flood of selling. It’s unclear Saylor could sell a big chunk of his coins at anything like their value on the books.

For years, Saylor created a risk-reward equation that appeared to work brilliantly. Now the risks are swamping the rewards.