Bitcoin News Today: Wall Street Critic Slams Strategy's Deceptive Earnings Comparison to Apple and NVIDIA

A Wall Street veteran has accused Strategy, formerly known as MicroStrategy, of making a "deceptive" comparison in its recent earnings presentation, misleadingly aligning its financial metrics with those of established S&P 500 companies like Apple and NVIDIA [1]. According to Andy Constan, CEO and CIO of Damped Spring Advisors, the firm misrepresented its earnings by implying that its revenue is recurring, when in reality it was driven by a one-off gain in the valuation of its Bitcoin holdings [1]. The presentation, made during its Q2 earnings call, has been described as "100% fraudulent" by Constan, who argued that such a comparison misleads investors by implying financial stability and consistency that does not exist [1].

The misleading slide, which has since been shared widely, showed a 4.7x P/E ratio compared to NVIDIA's 40.8x at the time, suggesting that Strategy was significantly undervalued [1]. Strategy CEO Phong Lee emphasized the comparison during the call, asserting that the company was “possibly the most misunderstood and undervalued stock in the U.S. and potentially the world” [1]. However, Constan and others have pointed out that the earnings were a result of non-recurring market-to-market gains from Bitcoin revaluation under revised GAAP rules, rather than from sustainable business operations [1].

Strategy reported a $10 billion second-quarter profit in June, or $32.60 per common share, driven by the appreciation of its Bitcoin reserves [1]. This marked a stark contrast to its $5.9 billion loss in Q1, when Bitcoin prices declined. The company’s strategy has involved issuing preferred shares to fund Bitcoin purchases, a practice that Constan likened to a Ponzi scheme, given the lack of traditional revenue streams and reliance on asset valuation for profitability [1]. He also warned that if Bitcoin's price were to fall, the firm could face historic losses in a single quarter.

The controversy has led to multiple class-action lawsuits, accusing Strategy of making "false and misleading" statements about its profitability and investment strategy [1]. The company has responded by stating it intends to “vigorously defend itself against these claims” in SEC filings. Meanwhile, the legal battle is expected to test the boundaries of how companies can use financial metrics and analogies to position themselves in the market, especially in sectors where traditional revenue models do not apply [1].

Critics like Lyn Alden, a macro analyst, have not outright labeled the statements as fraudulent but have expressed disagreement with the visual comparisons used by Strategy. The debate highlights the growing scrutiny of how companies in the crypto and fintech sectors communicate their value to investors. As Strategy’s shares have seen significant volatility in recent months, the incident serves as a cautionary example of the risks associated with marketing strategies that overstate financial performance or mislead through selective framing.

The firm’s aggressive Bitcoin strategy, which includes using preferred share issuance to fund purchases, remains controversial. Constan warned that the company may struggle to meet preferred dividend obligations without further capital infusions, raising concerns about its long-term financial sustainability [1]. As the legal and regulatory landscape continues to evolve, the case may influence future guidelines on corporate disclosures and investor communications, particularly in markets where asset valuation plays a central role in reported earnings.

Source:

[1] Strategy Pushed 'Deceptive' Comparison to Apple and ...

https://decrypt.co/335283/strategy-deceptive-comparison-apple-nvidia-wall-street-veteran-says