Michael Saylor is facing a new legal threat as Strategy’s stock plummets
Michael Saylor has faced renewed legal pressure after a shareholder rights firm opened an investigation into Strategy, adding to the increased scrutiny that has accompanied the company’s sharp stock decline and the recent selloff of Bitcoin.
Summary
- The Rosen Law Firm has launched a strategic investigation into potential securities claims and is preparing for a potential shareholder class action.
- Shares of the plan have fallen below $100 and are down nearly 23% in the past week as the Bitcoin selloff is intensifying market pressure.
- Peter Schiff and CryptoQuant expressed different concerns about Strategy’s Bitcoin strategy, liquidity position, and capital allocation.
According to the Rosen Law Firm, the investigation examines whether Strategy misled investors with incorrect business disclosures. The company said it is reviewing potential securities claims and is preparing for a possible class action on behalf of its losing shareholders.
This announcement comes about a week after Bitcoin critic Peter Schiff publicly asserted that investors Strategy’s STRC shares that they liked could have legal grounds if they bought a security based on Saylor’s promotion of the company’s Bitcoin-backed investment strategy. Schiff’s comments came before either law firm publicly disclosed plans to vet applications from potential shareholders.
Meanwhile, pressure on the company continued in the market. Yahoo Finance data shows Strategy shares dipped below the $100 mark earlier this week before falling to around $86 on Thursday, leaving the stock down more than 6.5% on the day and about 23% over the past week.
Concerns have grown over the stock price
The legal scrutiny follows growing criticism that has already surrounded Strategy Bitcoin’s treasury model. As crypto.news reported yesterday, Schiff said that continued weakness in Strategy’s stock may force the company to make tough decisions on capital allocation.
According to Schiff, persistent selling pressure from short sellers could make buying back Strategy shares more attractive than buying more Bitcoin. He argued that selling part of the company’s Bitcoin holdings to fund a stock buyback could narrow the gap between Strategy’s market valuation and the value of its underlying assets, though he doubted whether such a move would be enough to restore investor confidence.
Schiff also warned that any sale of Bitcoin by Strategy could balance the cryptocurrency market itself by adding new supply during a period of weak demand.
Different concerns have also come from on-chain analytics company CryptoQuant. The company’s latest analysis urged Strategy to slow down the pace of Bitcoin accumulation and recapitalize.
According to CryptoQuant, annual dividend commitments linked to STRC’s permanent preferred stock rose to nearly $1.2 billion, while the company’s cash reserves fell by 38% by 2026.
CryptoQuant also estimated that dividend coverage has decreased from more than seven years to about 14 months. The company has calculated that to pay back the money in 24 months will require about $2.8 billion, which is almost double the company’s current cash.
Management continues to support their Bitcoin strategy
Even as outside criticism intensified, Strategy’s leadership continued to defend its long-term approach to Bitcoin. Saylor recently pointed to conditions during the crypto bear market of 2022, when Bitcoin trades close to $16,000, and the company’s debt exceeds the combined value of Bitcoin and reserves.
According to Saylor, the financial situation of the company since then has improved significantly, as Bitcoin and cash reserves now exceed outstanding debt by more than 40 billion dollars. His comments indicate that Strategy does not intend to abandon its Bitcoin strategy despite the recent market turmoil.
Meanwhile, more selling pressure appeared during Thursday’s session. Market analyst Zerohedge said unusually heavy options buying on Strategy shares coincided with fresh weakness in both MSTR stock and Bitcoin.
At the same time, Bitcoin extended losses after US Personal Consumption Expenditures inflation was reported to have risen to 4.1%, its highest reading since 2023, adding another source of pressure for both the cryptocurrency and companies with significant Bitcoin exposure.
