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 owning bitcoin – carries significant financial risk despite its large market capitalization and strong capital market access.
The lowest investment grade on S&P’s scale is BBB, making Strategy’s B rating firmly in non-investment grade territory, also 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 risk of default, but not as bad as CCC, which means very low credit quality with high risk of default.
The Michael Saylor-led company has transformed from an enterprise software company into what is essentially a publicly traded bitcoin holding vehicle. The firm uses almost all of its excess cash to buy more bitcoin, and funds many of its operations and crypto purchases by issuing convertible debt, preferred stock and equity.
Strategy Executive Chair Michael Saylor noted that his company has now become the first ever bitcoin treasury firm to receive a rating from a major credit bureau. His thoughts were echoed by others in the industry, among them KindlyMD ( NAKA ) CEO David Bailey, who said that “market demand for finance companies is exploding.”
Ratings are often a necessary step for many pension funds and other institutional investors in order to invest in corporate securities. 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 about $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 Strategi has very little actual cash and almost no reliable operating income. The company’s software business is roughly break-even, and from January to June 2025, Strategy reported a negative $37 million in operating cash flow.
S&P has also flagged what it calls a “currency mismatch.” While the company’s assets are almost entirely in bitcoin, its debt and dividend obligations are in US 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 fall and investor appetite weakens, the firm could face a liquidity crisis.
A key limitation of 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. The accounting treatment leaves Strategy with a capital deficit 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. Although Strategy can defer these payments, doing so would trigger governance sanctions such as giving 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 the dividend through new stock 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 big expiration 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 access to capital becomes restricted or if risks around debt repayment increase. However, an upgrade is unlikely in the near term unless Strategy significantly increases its dollar liquidity and reduces its reliance on convertible debt to fund operations.
In S&P’s eyes, Strategy’s fortunes remain closely 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 bitcoin price to $115,500.
