Ripple CEO criticizes Strategy's financial model: "Engineering tricks do not create value"
Ripple CEO Brad Garlinghouse has once again commented on Bitcoin, calling himself a long-term optimist, but at the same time harshly criticized the approach of Strategy company to financing cryptocurrency purchases. According to him, issuing preferred shares with a fixed dividend is nothing more than financial engineering that does not create real value for the market.
"Financial engineering does not create long-term value," Garlinghouse noted, emphasizing that the utility of an asset should be the basis of its value.
Recall that Strategy has been raising capital through STRC preferred shares with an annual dividend yield of 11.5% for about a year. Initially, the securities were expected to trade near $100, but reality turned out differently. As of June 26, STRC had fallen 28% below par, reaching a low of $74.6. MSTR common shares also dropped to $82.3 — the lowest level since February 2024. Bitcoin during the same period fell below the $59,000 mark.
The mNAV ratio, which reflects the company's market capitalization relative to its BTC holdings, shrank to 0.99 — below one. This is a worrying signal: the market values Strategy cheaper than the cost of its Bitcoin reserves.
Earlier, CryptoQuant analysts had already urged the company to pause purchases and rebuild cash reserves. The dividend coverage ratio for STRC has fallen from over seven years to approximately 14 months. This means that at the current income level, the company will be able to pay dividends for just over a year — unless it changes its strategy.
Against this backdrop, Strategy founder Michael Saylor presented a five-tier model of the Bitcoin economy in June. However, as practice shows, beautiful concepts are not always backed by a solid financial foundation.
Cryptalist expert opinion:
Strategy's model initially looked like a brilliant financial trick, but now it is showing its vulnerability. When the market stops believing in Bitcoin's endless growth, such structures collapse faster than their creators can issue new shares. Investors should pay closer attention not only to the accumulation strategy but also to how exactly companies finance their ambitions.