On April 1, 2025, I posted an analysis of Strategy, Inc. $MSTR ( ▲ 3.11% ). Most of my analysis are strictly focused on fundamentals. This one was different. Though I might communicate caution, I rarely tell people to stay away from a stock. This was one of those times.

At the time, Strategy, Inc. was known as an AI-powered analytics software business. They were popular at the time because of their change in strategy. Instead of focusing on AI, they were buying and holding Bitcoin. They are now known as a Bitcoin treasury company (whatever that means). My question was, why would anyone buy this stock instead of simply buying Bitcoin themselves?

The first red flag any investor with some sense should have seen: this is an AI company that doesn’t profit from their operations during an AI boom. 🚩 If it were me looking for an investment, my analysis would have wrapped up at this moment. But since this company was gaining popularity, I continued analyzing for content purposes only. Unfortunately, hype can be louder than common sense and not everyone knows how to not buy the hype.

If this company is buying and holding bitcoin, and they are losing money, then where is the money coming from allowing them to buy bitcoin? Any time a company is losing money, you have to identify where the cash is coming from to run their business. It will come from cash reserves, debt, or they will sell shares (known as equity financing). A look at their financials and I saw $5 billion of debt added to the balance sheet and $16.3 billion coming in through selling shares in 2024 alone! (They’ve sold another $10B through three quarters of September 2025).

When a company sells shares, they are bringing in cash at the expense of the existing shareholders. More outstanding shares added to the pot means the existing shares are less valuable. Generally, companies that buy their own shares are getting rid of those shares and adds value to the existing investors, while selling shares does the opposite. Selling shares are a good idea when the stock is overvalued and the company can invest in operations for a greater return. Any other time this happens, its a sign that management isn’t allocating capital in a way that protects your investment.

As I mentioned earlier, they brought in $16.3 billion in cash to buy Bitcoin since they aren’t making money from what use to be their primary business. For a company only carrying $38 million of cash on their balance sheet, this share dilution is beyond significant and was red flag #2 for me. 🚩🚩

Why would you invest in a company that is betting their success on the future price of Bitcoin when you can just buy Bitcoin yourself? And with much less risk? If you buy and hold Bitcoin, you’re exposed to the volatility of a digital asset that may or may not go up as crypto enthusiast promise. If that’s the risk you’re willing to take, fine.

There is absolutely no need to invest in a company that’s taking your cash, investing in the same asset you can buy yourself, then continue having the value of your shares diluted because they’ve continued selling a ton of shares each year so they can buy more.

The company’s strategy went from running an AI analytics company to making a simple, but huge bet on Bitcoin. Instead of building a profitable business and using excess cashflow to buy the digital asset, they will continue to make your shares practically worthless to do it.

The stock is down for the exact major risks I identified last year. Bitcoin prices are falling and investors are concerned over share dilution. If only they subscribed to my YouTube channel. 😄

I’ll be the first one to tell you that a stock can be down at any point in time. A stock can be down when a company is performing well and that’s the type of opportunity we hope for. But when the stock is down and the company’s capital allocation can’t be trusted, I would say run, but you should be well down the road by now.

Strategy, Inc. is a sorry excuse for a failed management team that is taking cash from investors to bet on Bitcoin and trying to make it sound smart instead of closing their doors as they should.