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, which revolves almost entirely around holdings in Bitcoin, poses significant financial risks despite its high market capitalization and strong access to capital markets.
The lowest investment grade rating on S&P’s scale is BBB, and Strategy’s rating is B-, firmly in the non-investment grade realm known as junk bonds.
According to S&P, a B rating signifies “speculative credit quality with increased default risk.” So a B- means it’s a little more speculative and has a little bit more default risk, but it’s not as bad as CCC, which means it has very low credit quality and high default risk.
Michael Saylor’s company has transformed from an enterprise software company to what is essentially a publicly traded Bitcoin company. BTC$114,385.17 Owned vehicle. The company has used almost all of its excess cash to buy more Bitcoin, and is financing much of its business and cryptocurrency purchases by issuing convertible debt, preferred stock, and equity.
Strategy Executive Chairman Michael Saylor said the company became the first Bitcoin treasury company to receive a rating from a major credit institution. His sentiments were echoed by industry insiders, including KindlyMD (NAKA) CEO David Bailey, who said, “The market demand for financial companies is about to explode.”
Ratings are often a necessary step in allowing many pension funds and other institutional investors to invest in corporate paper. Stategy is currently rated as junk, but future upgrades could open the door to a lot of funding.
S&P’s philosophy
As of mid-2025, Strategy’s Bitcoin holdings are valued at approximately $70 billion, compared to approximately $15 billion in convertible debt and preferred stock. But S&P said Strategy’s balance sheet strength is deceptive because it has very little actual cash and almost no reliable operating income. The company’s software business is close to breaking even, with Strategy’s operating cash flow from January to June 2025 being negative $37 million.
S&P also warned of what it called a “currency mismatch.” The company’s assets are almost entirely in Bitcoin, but its debt and dividend obligations are denominated in US dollars. This means that if the strategy is unable to raise enough new capital during an economic downturn, it could face pressure to sell its Bitcoin, possibly at a loss. S&P warned that the company could face liquidity shortages if Bitcoin prices fall and investor appetite weakens.
One of the key constraints on the company’s rating is that its adjusted total capital is negative. S&P’s methodology excludes Bitcoin from equity calculations due to its volatility and uncorrelated market risk. This accounting treatment leaves Strategy with a capital deficit on paper, even though it owns billions in digital assets.
Preferred stock dividends are also a potential issue. The company owes more than $640 million in annual dividends across four classes of preferred stock. Strategy could defer these payments, but doing so would incur governance penalties such as giving board seats to preferred shareholders. Two of the preferred classes accrue interest at higher rates on deferred payments. Strategy said it plans to raise the dividend through the sale of new shares rather than selling Bitcoin.
Despite the risks, S&P gave the company a stable outlook, citing its 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 unless Bitcoin’s price collapses.
S&P said it could downgrade the company’s rating if its access to capital is restricted or the risk of debt repayment increases. However, an upgrade is unlikely in the near term unless the strategy significantly increases dollar liquidity and reduces reliance on convertible bonds to manage funds.
In S&P’s eyes, Strategy’s fate remains closely tied to Bitcoin. As long as that continues, the risks will remain.
MSTR stock rose nearly 3% on Monday as Bitcoin prices rose to $115,500 over the weekend.
