Ripple CEO criticized Strategy's Bitcoin purchase model: "Financial engineering does not create value."
Ripple CEO Brad Garlinghouse remains bullish on Bitcoin but harshly criticized Strategy's approach to financing Bitcoin purchases through the issuance of preferred shares. In a recent statement, he emphasized that such financial engineering does not contribute to long-term value creation, which, in his view, is determined solely by the asset's utility.
Failure of STRC Preferred Shares
Recall that about a year ago, Strategy began raising capital to acquire Bitcoin by issuing STRC preferred shares with a fixed annual dividend of 11.5%. Initially, these securities were expected to trade near $100. However, reality turned out differently: as of June 26, STRC hit an all-time low, falling 28% below par to $74.6. Garlinghouse rightly called this a "devastating indictment" of the chosen model. Strategy's common shares (MSTR) also failed to hold up — they fell to their lowest level since February 2024, closing at $82.3, while Bitcoin itself dropped below $59,000.
Critical Signal from the Market and Analysts
The company's mNAV ratio, which measures market capitalization relative to Bitcoin assets, shrank to 0.99. This is a warning sign, indicating that the market values the company below the worth of its primary reserve. Earlier, CryptoQuant analysts had already urged Strategy to pause cryptocurrency purchases and rebuild cash reserves. According to their assessment, the STRC dividend coverage buffer has shrunk from over seven years to approximately 14 months.
In my view, the current situation highlights the fundamental vulnerability of a model built on aggressive leverage in a volatile market. A strategy that seemed brilliant in a rising market turns into a financial trap during a correction. Investors should closely watch whether Michael Saylor can adapt his five-tier Bitcoin economy model to new realities, or whether the market itself will correct this "financial engineering."