What to know:
- Peter Schiff argues that Strategy’s latest Bitcoin purchase diluted shareholder value.
- Strategy acquired 1,550 Bitcoin using capital raised through stock.
- Schiff says discounted share sales reduced Bitcoin’s backing per share.
Euro Pacific Capital CEO Peter Schiff has criticized Strategy’s latest Bitcoin acquisition, arguing that the company’s funding model is no longer creating the same benefits for shareholders as it did in previous years.
According to Schiff, Strategy’s Bitcoin accumulation strategy relied heavily on periods when its stock traded at a significant premium to the value of the Bitcoin held on its balance sheet. During those periods, the company could issue new shares, raise substantial capital, and acquire additional Bitcoin without materially reducing shareholder value.
However, Schiff believes that market conditions have changed. He noted that recent share sales have occurred while Strategy stock trades below its net asset value. Consequently, the company must issue more shares to raise the same amount of money, which changes the economics behind each Bitcoin purchase.
His latest comments followed Strategy’s acquisition of 1,550 Bitcoin for approximately $101 million earlier this month. While many Bitcoin supporters welcomed the purchase as another sign of the company’s commitment to its treasury strategy, Schiff argued that the transaction may have had the opposite effect on shareholders.
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Schiff Challenges Strategy’s Current Capital-Raising Approach
According to Schiff, Strategy funded the purchase by issuing stock at discounted levels. As a result, the increase in outstanding shares outweighed the proportional increase in Bitcoin holdings. He claimed that this reduced the amount of Bitcoin backing each share and effectively created a negative Bitcoin yield for investors.
Schiff explained that the company’s earlier purchases produced different outcomes because stock sales were completed at premiums. Those conditions allowed Strategy to increase its Bitcoin holdings while preserving, and in some cases improving, Bitcoin exposure per share.
Moreover, Schiff pointed to the market performance that followed the acquisition. He noted that Bitcoin declined shortly after the purchase, leaving the newly acquired coins at an unrealized loss. He estimated that the position lost more than $6 million in value within a short period.
The longtime Bitcoin critic also questioned the sustainability of Strategy’s broader financing structure. He suggested that if investor demand for the company’s capital-raising vehicles weakens, management could face additional pressure when seeking funds for future purchases.
Schiff argued that buying back discounted shares would be a more logical use of capital under current conditions. In his view, such a move would provide greater value to shareholders than issuing additional stock to purchase more Bitcoin.
Schiff’s remarks have added another layer to the debate surrounding Strategy’s Bitcoin treasury model. While supporters continue backing the company’s accumulation strategy, critics remain concerned about shareholder dilution and the impact of stock sales conducted below net asset value.
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