Strategy (MSTR) received a B- credit rating from S&P Global on Monday. The rating reflects S&P’s view that the company’s business model, focused almost exclusively on holding bitcoin, carries significant financial risk, despite its large market capitalization and strong access to capital markets.
The lowest investment grade rating on S&P’s scale is BBB, which puts Strategy’s B- rating solidly in non-investment grade territory, also known as junk bonds.
According to S&P, a B rating means “speculative credit quality with increased risk of default.” Therefore, a B- would mean a slightly more speculative and slightly higher default risk, but not as bad as the CCC, which means very low credit quality with a high default risk.
The company led by Michael Saylor has transformed from an enterprise software company to what is essentially a publicly traded bitcoin. retention vehicle. The company uses almost all of its excess cash to purchase more bitcoin and finances many of its cryptocurrency operations and purchases by issuing convertible debt, preferred stock, and equity.
Chief Strategy Officer Michael Saylor noted that his company has now become the first bitcoin treasury company to receive a rating from a major credit agency. His thoughts were echoed by others in the industry, including KindlyMD (NAKA) CEO David Bailey, who said “market demand for treasury companies is about to explode.”
Ratings are often a necessary step for many pension funds and other institutional investors to invest in corporate securities. Stategy is now rated junk, but future updates could open the doors to many funds.
S&P thinking
As of mid-2025, Strategy’s bitcoin holdings were valued at about $70 billion, compared to about $15 billion in total outstanding convertible debt and preferred stock. But that balance sheet strength is misleading, S&P said, because Strategy has very little real cash and almost no reliable operating income. The company’s software business is roughly breakeven, and from January to June 2025, Strategy posted negative operating cash flow of $37 million.
S&P also flagged what it called a “currency mismatch.” While the company’s assets are almost entirely in bitcoin, its debts and dividend obligations are in US dollars. That means Strategy could face pressure to sell bitcoin (possibly at a loss) if it can’t raise enough new capital in a downturn. S&P warned that if bitcoin prices fall and investor appetite weakens, the company could face a liquidity crisis.
A key limitation to the company’s rating is its “negative total adjusted capital.” Under S&P’s methodology, bitcoin is excluded from stock calculations due to its volatility and uncorrelated market risks. That accounting treatment leaves Strategy with a capital deficit on paper, even though it owns billions in digital assets.
Preferred stock dividends also pose a potential challenge. The company owes more than $640 million annually in dividends on four classes of preferred stock. While Strategy can defer these payments, doing so would trigger governance sanctions, such as granting board seats to preferred shareholders. Two of its preferred classes also earn interest on deferred payments at higher rates. Strategy has said it plans to fund dividends through new share sales, not by selling bitcoin.
Despite the risks, S&P assigned a stable outlook, citing the company’s past success in managing debt maturities and maintaining access to capital markets. The next major expiration date isn’t until 2028, giving the company some breathing room as long as the bitcoin price doesn’t collapse.
S&P said it could lower the rating if the company’s access to capital is limited or if risks around debt repayment increase. However, an improvement is unlikely in the near term unless Strategy significantly increases its dollar liquidity and reduces its reliance on convertible debt to finance operations.
In the eyes of S&P, Strategy’s fate remains closely tied to bitcoin. As long as this remains the case, so will the risks.
MSTR shares rose nearly 3% on Monday along with a weekend rally in the price of bitcoin to $115,500.
