Strategy (NASDAQ:MSTR) may have created a capital structure problem that could hurt either Bitcoin (CRYPTO: BTC), MSTR shareholders or preferred holders, according to a prominent industry expert.

Strategy's Changing Risk Profile

Speaking on Unchained's "Bits + Bips" podcast, Arca Chief Investment Officer Jeff Dorman said Strategy's decision to add large, preferred stock obligations has changed the risk profile around Michael Saylor's Bitcoin strategy.

Strategy recently disclosed it sold 32 Bitcoin at the end of May for roughly $2.5 million, marking a notable shift for a company long known as one of Bitcoin's most aggressive buyers.

Dorman said the sale itself was small, but the signal was large.

The concern centers on Strategy's preferred stock structure, which Dorman said now carries roughly $1.7 billion in annual dividend obligations.

Unlike earlier convertible debt, those preferred dividends create recurring cash needs for a company whose core business does not generate enough cash to fund them.

Dorman said Strategy now has several choices, but none are clean.

Selling Bitcoin pressures BTC sentiment, selling stock dilutes MSTR holders, issuing debt hurts credit quality, cutting preferred dividends could crush preferred shares and trigger lawsuits.

"Someone is going to lose badly here," Dorman said.

BTC Holders' Risk And Capital Structure Pressure

Dorman said Bitcoin investors now face a new problem: Strategy, the world's largest corporate Bitcoin holder, has shown it can sell.

He argued Strategy may have been better off selling a larger Bitcoin block at once and clearly stating it had funded dividend needs, rather than "teasing" future sales.

Higher Bitcoin prices could lift MSTR, restore confidence and allow the company to raise capital more easily.

But if Bitcoin stays flat or keeps falling, Dorman says Strategy's flywheel weakens.

He also noted that Strategy's recent move to pay down 2029 convertible debt reduced its cash cushion and shortened the runway for funding preferred dividends.

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