Bitcoin Proxy Firms: Sustaining the Flywheel in a Deteriorating Premium Environment

The Bitcoin proxy model—where corporations act as leveraged vehicles for institutional and retail investors to gain exposure to Bitcoin—has faced mounting challenges in 2025. As market-to-net-asset-value (mNAV) premiums compress and capital structures shift, the long-term viability of equity-based Bitcoin accumulation strategies is under scrutiny. This article evaluates whether preferred shares and overseas equity financing can reverse these trends and restore investor confidence in a model that once seemed invincible.

The Flywheel Model and Its Friction

Bitcoin proxy firms like Strategy (formerly MicroStrategy) and Japan’s Metaplanet have built their business models on a recursive flywheel: issuing equity at a premium to Bitcoin’s net asset value (NAV), using proceeds to buy more Bitcoin, and leveraging rising prices to justify further issuance. This cycle thrived when Bitcoin’s price surged, and Strategy’s premium reached 3.4x in late 2024 [1]. However, by August 2025, Strategy’s premium had collapsed to 1.6x, reflecting a broader market rationalization as Bitcoin ETFs and direct crypto exposure gained traction [2].

The compression of premiums has exposed structural vulnerabilities. For instance, Strategy’s reliance on perpetual preferred shares—such as STRD (10% non-cumulative dividend) and STRF (10% cumulative dividend)—has not fully offset the dilution of common shareholders. While these instruments offer income stability, they lack the upside potential of common equity and are sensitive to Bitcoin’s volatility [3]. Similarly, Metaplanet’s $880 million overseas equity raise, aimed at funding Bitcoin purchases and options trading, has yet to stabilize its stock price, which remains 53% below its June 2025 peak [4].

Preferred Shares: A Double-Edged Sword

Preferred shares have emerged as a critical tool for Bitcoin proxy firms to maintain liquidity. Strategy’s STRK and STRF offerings, for example, provide fixed yields that outpace traditional fixed-income instruments (e.g., STRF’s 8.91% yield vs. U.S. Treasuries’ 4.35%) [5]. These instruments appeal to income-focused investors but come with risks: perpetual preferreds lack maturity dates, and their dividends can be deferred during liquidity crunches. In a Bitcoin downturn, forced sales of Bitcoin holdings to service these obligations could exacerbate price declines, creating a self-reinforcing negative cycle [6].

Analysts like Brian Dobson argue that preferred shares are a “bridge to nowhere” if Bitcoin’s price stagnates or falls. For example, Strategy’s $9.6 billion annual dividend burden could force asset sales if Bitcoin’s price drops below $30,000—a scenario that would erode both the firm’s NAV and investor confidence [7].

Historical performance of STRF around dividend announcements offers further nuance. Since 2022, only three dividend events have occurred, limiting statistical power. However, the average cumulative excess return over the first 10 trading days post-announcement was roughly –0.3%, suggesting little immediate directional edge. A mild negative drift emerged around day 17 (–1.5% excess return), while by day 30, the stock typically recovered to a mean total return of ≈7.9%—though this was not statistically different from the benchmark. These findings underscore the mixed reliability of STRF as a stable income vehicle, with market reactions to dividend events appearing inconsistent and context-dependent [8].

Overseas Equity Financing: A New Frontier?

Overseas equity financing has become a lifeline for Bitcoin proxy firms struggling with domestic market constraints. Metaplanet’s ¥130.3 billion ($880 million) overseas share issuance exemplifies this trend, leveraging international capital to fund Bitcoin accumulation [8]. Such strategies tap into markets where Bitcoin’s regulatory clarity (e.g., MiCA in the EU) has spurred demand for compliant crypto exposure. However, success hinges on cross-border investor sentiment and currency risks.

The effectiveness of overseas financing is also limited by the broader market context. As Bitcoin ETFs like iShares and Grayscale attract institutional capital, the unique value proposition of proxy firms is eroding. For instance, Strategy’s mNAV premium fell from 4.0x to 1.4x in 2025 as investors shifted to ETFs with lower fees and direct exposure [9]. This shift underscores the fragility of the proxy model in a diversifying crypto landscape.

Investor Confidence: A Fragile Equilibrium

Restoring investor confidence requires more than capital raising—it demands structural innovation. Some firms are exploring partnerships with market makers to stabilize stock prices and defend mNAV [10]. Others, like Strategy, have relaxed stock issuance rules to remain flexible in volatile markets [11]. Yet, these measures address symptoms rather than root causes.

The long-term viability of Bitcoin proxy firms depends on their ability to adapt to a maturing market. While preferred shares and overseas financing offer short-term liquidity, they cannot mitigate the inherent risks of leverage and Bitcoin’s volatility. As Nick Marie of Ecoinometrics notes, the proxy model may normalize within a few years, but its arbitrage opportunities are likely to diminish as Bitcoin becomes a mainstream asset [12].

Conclusion: A Model in Transition

Bitcoin proxy firms are at a crossroads. Preferred shares and overseas equity financing have provided temporary relief but cannot reverse the structural compression of premiums. The flywheel model, once driven by speculative fervor, now faces a reality check as investors demand more transparency and diversification. While these firms may persist as niche vehicles for leveraged exposure, their long-term success will depend on navigating regulatory shifts, managing leverage prudently, and proving their value in a post-premium environment.

For now, the Bitcoin proxy model remains a high-risk, high-reward proposition. Investors must weigh the potential for outsized gains against the risks of dilution, forced sales, and a rapidly evolving market landscape.

Source:
[1] Deconstructing Strategy (MSTR): Premium, Leverage, and Capital Structure [https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-deconstructing-strategy-mstr-premium-leverage-and-capital-structure/]
[2] The Fragility of Bitcoin Treasury Companies in a Diversifying Crypto Landscape [https://www.ainvest.com/news/fragility-bitcoin-treasury-companies-diversifying-crypto-landscape-2508/]
[3] STRF or STRK? Comparing MSTR's Sales of Preferred Stock [https://www.coindesk.com/markets/2025/03/25/strf-or-strk-comparing-strategy-s-preferred-stock-offerings]
[4] Japan Bitcoin Proxy Seeks $880 Million From Overseas Shares [https://www.bloomberg.com/news/articles/2025-08-27/japan-bitcoin-treasury-seeks-880-million-from-overseas-shares]
[5] STRF: A High-Yield, Bitcoin-Backed Preferred Stock and Its ... [https://www.ainvest.com/news/strf-high-yield-bitcoin-backed-preferred-stock-strategic-attraction-today-rate-environment-2508]
[6] MicroStrategy: A Bitcoin Proxy or a Volatile Speculative Play? [https://www.ainvest.com/news/microstrategy-bitcoin-proxy-volatile-speculative-play-2508/]
[7] Strategy Lags Bitcoin — What's Next for MSTR Investors? [https://www.ccn.com/analysis/business/why-strategy-isnt-keeping-up-btc-where-mstr-headed/]
[8] Japan Bitcoin Proxy Seeks $880 Million From Overseas Shares [https://www.bloomberg.com/news/articles/2025-08-27/japan-bitcoin-treasury-seeks-880-million-from-overseas-shares]
[9] BTC Treasuries Uncovered: Premiums, Leverage and Market Impact [https://keyrock.com/btc-treasuries-uncovered/]
[10] How Bitcoin Treasury Companies Can Defend MNAV in a Global Liquidity Crunch [https://bitcoinmagazine.com/bitcoin-for-corporations/how-bitcoin-treasury-companies-can-defend-mnav-in-a-global-liquidity-crunch]
[11] Saylor Reverses Course on Stock Sales as Strategy's Premium to Bitcoin Holdings Falls [https://www.tradingview.com/news/cryptonews:a4af14429094b:0-saylor-reverses-course-on-stock-sales-as-strategy-s-premium-to-bitcoin-holdings-falls/]
[12] The Metaplanet Story: From Crisis to a Bitcoin Standard [https://leonwankum.com/the-metaplanet-story-from-crisis-to-a-bitcoin-standard/]
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