The strategy (MSTR) received a B-credit rating from S&P Global on Monday. The ratings reflect S&P’s view that the company’s business model – focused almost entirely on holding Bitcoin – poses significant financial risk, despite its large market capitalization and strong capital markets access.
The lowest investment grade rating in the S&P scale is BBB, solidifying the strategy’s B-rating in the non-investment grade area, otherwise known as junk bonds.
According to S&P, the B rating means “speculative credit quality with increased default risk.” Thus B- would mean slightly more speculative and slightly more increased default risk, but not as bad as CCC, which means much lower credit quality with a higher risk of default.
The Michael Saylor-led firm has transformed from an enterprise software company to essentially publicly traded bitcoin. Holding a vehicle. The company uses almost all of its excess cash to buy more Bitcoin and finance many of its operations and crypto purchases by issuing convertible debt, preferred stock, and equity.
Strategy Executive Chairman Michael Saylor said his company has now become the first Bitcoin treasury firm to receive a rating from a major credit agency. His views were echoed by others in the industry, including KindleMD (NAKA) CEO David Bailey, who said that “market demand for treasury companies is going to increase.”
Rating is often a necessary step for many pension funds and other institutional investors to be able to invest in corporate paper. Statzy is now junk-rated, but future upgrades could open the door to lots of funds.
S&P’s thinking
By mid-2025, the strategy’s Bitcoin holdings were valued at approximately $70 billion, while total outstanding convertible debt and preferred equity stood at approximately $15 billion. But S&P said the balance sheet strength is deceiving, because the strategy has little real cash and almost no reliable operating income. The company’s software business is largely loss-making, and from January to June 2025, the strategy recorded negative $37 million in operating cash flow.
S&P even called it a “currency mismatch”. While the company’s assets are almost entirely in Bitcoin, its debt and dividend obligations are in US dollars. This means the strategy could face pressure to sell Bitcoin – possibly at a loss – if it is unable to raise enough new capital during a bearish period. S&P warned that if Bitcoin prices fall and investor interest weakens, the company could face a liquidity crisis.
A major constraint on the company’s rating is its “negative total adjusted capital”. Under S&P’s methodology, Bitcoin is excluded from equity calculations due to its volatility and uncorrelated market risks. That leaves the accounting treatment strategy with a lack of capital on paper, even though it has billions in digital assets.
Preferred stock dividends also present a potential challenge. The company is owed more than $640 million in annual dividends across four classes of preferred equity. Although the strategy could defer these payments, doing so could lead to governance penalties such as giving away board seats to preferred shareholders. Its two preferred classes also earn interest on deferred payments at higher rates. The strategy has said it plans to raise the dividend not by selling bitcoin, but through a new equity sale.
Despite the risks, S&P gave a stable outlook, citing the company’s past success in managing debt maturities and maintaining access to capital markets. The next major maturity date is not until 2028, which will provide some relief for the company unless the price of Bitcoin declines.
S&P said it may downgrade the company’s ratings if its access to capital is disrupted or if debt repayment risks increase. However, an upgrade is unlikely in the near term unless the strategy significantly increases its dollar liquidity and reduces its reliance on convertible debt to fund operations.
In S&P’s eyes, the strategy’s fortunes are tightly tied to Bitcoin. As long as this situation persists, there will be risk.
MSTR shares rose nearly 3% on Monday, taking the price of Bitcoin to $115,500 over the weekend.