S&P Slaps B- Rating on Strategy (MSTR), Citing Bitcoin (BTC) Exposure and Cash Burn

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 — centered almost entirely on holding bitcoin — carries significant financial risk, despite its large market cap and strong capital markets access.

The lowest investment grade rating in S&P’s scale is BBB, making Strategy’s B- rating solidly in non-investment grade territory, otherwise known as junk bonds.

According to S&P, a B rating means “speculative credit quality with increased default risk.” A B- would thus mean a bit more speculative and a bit more increased default risk, but not as bad as CCC, which means very low credit quality with a high risk of default.

The Michael Saylor-led firm has transformed from an enterprise software company into what is essentially a publicly traded bitcoin BTC$114,003.09 holding vehicle. The firm uses nearly all of its excess cash to buy more bitcoin and finances many of its operations and crypto purchases by issuing convertible debt, preferred stock, and equity.

Strategy Executive Chairman Michael Saylor noted that his company has now become the first-ever bitcoin treasury firm to receive a rating from a major credit agency. His thoughts were echoed by others in the industry, among them KindlyMD (NAKA) CEO David Bailey, who said “the market demand for treasury companies is about to explode.”

Ratings are often a necessary step for many pension funds and other institutional investors to be able to invest in corporate paper. Stategy is junk-rated now, but future upgrades could open the doors to a lot of funds.

S&P’s thinking

As of mid-2025, Strategy’s bitcoin holdings were valued at roughly $70 billion, compared to about $15 billion in total outstanding convertible debt and preferred equity. But that balance sheet strength is deceiving, S&P said, because Strategy has very little actual cash and almost no reliable operating income. The company’s software business is roughly breakeven, and from January to June 2025, Strategy posted negative $37 million in operating cash flow.

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 U.S. 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 drop and investor appetite weakens, the firm could face a liquidity crunch.

One key 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 accounting treatment leaves Strategy with a capital shortfall on paper, even though it owns billions in digital assets.

Preferred stock dividends also pose a potential challenge. The company owes over $640 million annually in dividends across four classes of preferred equity. While Strategy can defer these payments, doing so would trigger governance penalties such as granting preferred shareholders board seats. Two of its preferred classes also accrue interest on deferred payments at higher rates. Strategy has said it plans to fund dividends through new equity 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 maturity date isn’t until 2028, giving the company some breathing room, as long as the price of bitcoin doesn’t collapse.

S&P said it could lower the rating if the company’s capital access becomes constrained or if risks around debt repayment rise. An upgrade, however, is unlikely in the near term unless Strategy significantly boosts its dollar liquidity and reduces its reliance on convertible debt to fund operations.

In the eyes of S&P, Strategy’s fortunes remain tightly tied to bitcoin. As long as that remains the case, so will the risks.

Shares of MSTR are up nearly 3% on Monday alongside a weekend rally in the price of bitcoin to $115,500.