⚡ LIGHTNING ROUND

📉 Dilution Backtrack – Strategy ($MSTR) said it wouldn’t dilute below 2.5x mNAV. Now? They’ve reversed course—despite trading at just 1.53x.

💰 The Glitch – Thanks to a FASB rule change, unrealized Bitcoin gains count as income. It’s legal. It’s misleading. It built the $MSTR premium.

🧮 mNAV Math – At today’s price, buying $MSTR means paying $172K per Bitcoin—while spot BTC trades around $113K.

🧨 The Risk – If BTC drops and Strategy can’t borrow, it will be forced to sell Bitcoin or issue more shares, both of which drive mNAV down even further.

🎯 The Setup – If $MSTR crashes to ~0.5x mNAV while BTC hits $30K, you could be buying in at $15K per coin—then ride the recovery for a potential 10x+.

🦊 The Shrewd Move – Skip the markup today. Watch for the spiral. Enter when fear peaks and math breaks.

WEEKLY WISDOM

CRISIS ALERT

The Legal Glitch That Built a Bitcoin Empire

Why $MSTR’s premium is collapsing—and the setup I’m watching for a 10x re-entry

Quick heads up on something I’ve been tracking:

Less than a month after promising not to dilute shares below 2.5x their net Bitcoin holdings (mNAV), Strategy ($MSTR) reversed course.

They’re now opening the door to more dilution—even as the market values them at just 1.5x.

Investors are furious!

Just weeks ago investors were promised no share dilution below 2.5x mNAV and how the company has reversed course.

This isn’t just a tactical shift.

It’s a sign that the whole premise behind Saylor’s Scheme is breaking down.

Here’s why that matters—and the asymmetric setup I’m watching.

The glitch that made Saylor’s Scheme possible

A recent FASB rule change allows public companies to report unrealized crypto gains as income.

It’s legal. But it’s also misleading.

You can hold Bitcoin, never sell it, and still report “earnings.”

That rule is what gave MicroStrategy (now Strategy) the cover to borrow heavily and build a massive Bitcoin position—while showing positive earnings on paper.

Investors bought in. At one point, $MSTR traded at over 3x the value of the Bitcoin it owned.

The logic?

Saylor would keep borrowing to buy more BTC, and shares would move even faster than the underlying.

It worked—until now.

Where things stand

As of this week, $MSTR trades at a 1.53x mNAV.

Which means if you buy it today, you’re effectively paying $172,770 per Bitcoin—while spot Bitcoin trades around $112,922.

That’s a 53% premium… for exposure you can now get without leverage or dilution risk through:

• IBIT (Blackrock)

• FBTC (Fidelity)

• BITO (ProShares)

• Directly from a crypto exchange

• From fintech firms like Robinhood, Cash App, or SoFI Invest

So again—why does anyone still buy $MSTR?

Simple: they believe in Saylor.

But I’m not sure they should.

He has been no stranger to scrutiny as he resigned as CEO amidst a cloud of accounting discrepancies that resulted in a nearly $1B fine from the SEC.

So he’s no stranger to sketchy accounting.

But the model has a fatal flaw

If Bitcoin keeps rising, Strategy can report gains, raise more capital, and keep the flywheel going.

But if Bitcoin pulls back (and we’re now entering the post-halving window where it often does), earnings flip negative.

Credit access tightens.

The company has to issue stock to pay off debt.

Investors get diluted and start to sell.

That’s exactly what this new guidance signals.

When dilution starts, confidence usually follows it out the door.

The floor won’t be 1.0x mNAV, it could be far lower.

In 2022, $MSTR traded at 0.52x mNAV, a 48% discount versus buying Bitcoin directly.

How could it happen?

During the crypto frenzy of 2022 a similar scheme developed where the TERRAUSD/LUNA ecosystem launched an algorithmic stablecoin.

The TERRA coin was considered stable because it could always be redeemed for $1.00 USD of the LUNA token.

This worked great while the market was rising, but as with most thing in crypto, it fizzled out during the market downturn.

Once investors realized that the value of all LUNA tokens exceeded the value of the issued TERRA tokens, investors ran for the doors.

The value of both tokens went to very nearly zero over six days.

Six days.

This is the downside risk for Strategy.

The entire scheme is based upon their stock trading at a multiple of the assets the firm owns just like the TERRA/LUNA scheme.

Once the mNAV goes negative, all bets are off.

At that point, when Strategy has to pay its debts, it will either have to sell its Bitcoin and drive mNAV lower or issue more shares driving mNAV lower.

Since they own 3% of all Bitcoin, this will drive Bitcoin lower exacerbating their problem.

This is the death spiral…

If they survive this, here’s what I’m watching for

I’m not touching $MSTR at a 53% markup.

But I am watching for the moment where the model breaks completely.

If Bitcoin drops 60–70% again—and Strategy gets panic-sold down to 0.5x mNAV—then it becomes interesting.

At that point, you’re effectively buying $30–40k Bitcoin for $15–20k via the shares.

If the market recovers?

• BTC goes from $30k → $100k = 3x+

• $MSTR rerates from 0.5x → 2.5x = 5x

That’s a possible 15x return for a single trade.

High risk, yes.

But this is an adequate reward to take on the risk of Saylor’s Scheme…

P.S. 🧠 Got a Smart Investing Move?
We’re collecting real strategies from readers who think a few steps ahead.
Share your best tip—and you might get featured.
👉 Submit Your Strategy

The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, consult with a qualified tax professional, financial advisor, or attorney.