Strategy's 'Entire Business Model Is A Fraud': Gold Bug Peter Schiff Challenges Michael Saylor To A Debate

Bitcoin treasury institution Strategy (NASDAQ:MSTR) is operating a fraudulent concern model, economist Peter Schiff has alleged.

“MSTR’s full concern exemplary is simply a fraud,” the Euro Pacific Asset Management planetary strategist said Sunday connected X, challenging Strategy Chair Michael Saylor to a statement astatine the cryptocurrency league Binance Blockchain Week scheduled for aboriginal December successful Dubai.

“Regardless of what happens to Bitcoin, I judge $MSTR volition yet spell bankrupt,” Schiff added.

Don't Miss:

• The AI Marketing Platform Backed by Insiders from Google, Meta, and Amazon — Invest astatine $0.86/Share

• Buffett's Secret to Wealth? Private Real Estate—Get Institutional Access Yourself

Schiff, successful a abstracted X post, said Strategy would not wage the dividends connected the preferred shares it has progressively travel to beryllium connected to rise superior to get Bitcoin.

“Once money managers recognize this they’ll dump the preferreds & $MSTR won’t beryllium capable to contented immoderate more, mounting disconnected a decease spiral,” helium said.

Strategy implicit the past 5 years has built a concern astir issuing equity to accumulate Bitcoin. The idea? Maximizing Bitcoin per stock for shareholders and acting arsenic a proxy for investors who ordinarily tin not summation vulnerability to the integer asset.

Schiff’s remarks travel arsenic Strategy has progressively turned to preferreds alternatively than communal banal for superior raises successful caller months. The displacement comes arsenic the company’s premium to nett plus worth has contracted significantly, making it hard to contented equity to money caller Bitcoin purchases without diluting shareholders. The metric has fallen from implicit 2.5 to little than 1 successful the past year.

Trending: An EA Co-Founder Shapes This VC Backed Marketplace—Now You Can Invest successful Gaming's Next Big Platform

The contraction has coincided with an detonation of copycat companies successful caller months. According to Bitcoin Treasuries, determination are present 194 companies with Bitcoin connected their equilibrium sheet.

Beyond the emergence of copycats, Strategy has faced further unit from Bitcoin’s marketplace descent successful the past month, from a terms grounds of $126,000 to arsenic debased arsenic $89,000 connected Tuesday.

While preferred stocks alteration Strategy to proceed accumulating Bitcoin successful the look of specified headwinds, the institution lacks important currency flow, which means dividends to aged investors would beryllium paid from superior raised from caller investors, which raises reddish flags for some.

The institution had astir $700 cardinal successful yearly dividend obligations arsenic of Q3.

“We wouldn’t miss a azygous dividend outgo connected an 80% drawdown,” Saylor said successful Strategy’s Q2 net telephone astatine the extremity of July.