Rosen Law Firm has started investigating Strategy for potential class-action lawsuit from investors related to various securities.
- Peter Schiff criticized Michael Saylor's company, Strategy, claiming it is in a "death spiral" leading to potential bankruptcy and investor lawsuits.
- Schiff highlighted the decline of Strategy's preferred stock, Stretch, below its $100 par value as a significant turning point.
- Schiff noted that Strategy is facing a class-action lawsuit for misrepresentations and that Saylor, as chairman, is held to a higher accountability standard.
Peter Schiff took his criticism of Michael Saylor’s Strategy (MSTR) to the next level on his podcast, saying the Bitcoin (BTC) treasury business had entered a “death spiral” that will result in bankruptcy and a flood of investor lawsuits soon.
The lifelong gold bull and Bitcoin skeptic claimed that the breakdown of Strategy’s flagship preferred stock, Stretch (STRC), below its $100 par value, was a turning point. He said the security was sold as a steady, income-producing product for seniors, but paid an 11.5% dividend that the corporation could not support from its operations.
"There's a tiny software business beneath [Strategy’s] pile of Bitcoin," he claimed, contending the unit could not service the company’s preferred and convertible debt commitments. He said the model assumed Bitcoin would appreciate 30% a year, a pace he said recent history did not support. The asset had drifted about sideways over five years, he added.
Why Strategy Could Go Bankrupt: Schiff’s Math
Strategy could not sell Stretch without materially boosting its dividend, leaving only the sales of ordinary shares to buy Bitcoin, he claimed. "The only way to sell more Stretch is to get the price up to 100, but he couldn't do that without substantially raising the yield, so I knew that he was out of the business of selling Stretch," Schiff said.
Since the stock was priced below net asset value, Schiff said each transaction diluted Bitcoin per share and eroded shareholder value. "He's asking his shareholders to take one for the Bitcoin team," he said. This comes as MSTR stock hit a 28-month low.
Strategy was facing shareholder class-action lawsuit over claimed misrepresentations, Schiff said, and Saylor was held to a higher standard as the chairman of an SEC-regulated company. One law firm was already putting a case together, he said, predicting others would do the same. The potential litigation “is a slam dunk,” he said.
Potential Lawsuit Against Strategy
Rosen Law Firm has initiated an inquiry into Strategy and has been seeking investors who purchased the company’s securities to join a potential class action lawsuit. The probe involves many Strategy-related assets, including MSTR and its preferred shares, STRF, STRC, STRK, and STRD.
The comments are based on Schiff’s own analysis. Saylor has often supported Strategy’s Bitcoin acquisition model, and on Friday, he noted, “Strategy remains focused on Bitcoin, disciplined capital allocation, credit quality, and long-term value creation. We appreciate our investors and will continue to execute with transparency and resolve.
MSTR’s price closed at $82, down over 3% on Friday. On Stocktwits, retail sentiment around MSTR however improved to ‘bullish’ from ‘extremely bearish’ over the past month.
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