Unchained Ep. 971: Is Strategy's Model Unraveling? What is Driving the Recent Rout and Where It Can Go From Here

Date: December 5, 2025
Host: Steve Ehrlich (guest host, for Laura Shin)
Guests: Mark Palmer (Senior Equities Analyst, Benchmark Stonex), Vinny Lingam (Crypto entrepreneur, co-founder Praxos Capital Management)

Main Theme / Purpose

This episode centers on the current challenges facing “Strategy” (widely understood in context as MicroStrategy, referenced as "Strategy" throughout the episode), particularly the recent rout in its stock price, questions over its capital structure, sustainability of dividend payments, and the broader implications for Bitcoin “DAT” (Digital Asset Treasury) companies. Mark Palmer represents the bullish case, while Vinny Lingam offers a critical, bearish perspective. Both dissect the innovative yet controversial use of perpetual preferred shares, dilution risks, and what regulatory clarity could mean for the ecosystem.

Key Discussion Points & Insights

1. Recent Struggles and Background

[02:13]

• Strategy's share price and net asset value (NAV) have sharply declined, prompting speculation on the sustainability of its business model and capacity to pay $700M/year in dividends.
• Increase in competition: Many new DATs have entered, drawing capital away.

2. Bullish Case — Mark Palmer’s Perspective

[02:50], [07:54], [13:39]

• Palmer began covering Strategy in 2021, highlighting historical volatility and noting similar “crypto is dead” narratives after the FTX collapse.
• Unique capital structure: Strategy pioneered five flavors of perpetual preferred stock—these are “close to non-dilutive", offer permanent capital, and provide unmatched flexibility to accumulate Bitcoin.
• Points out that the convertible bonds on the books ($8.2B at avg. 0.42% coupon) are intended to be replaced with perpetual preferreds.
• Argues that temporary macro headwinds (crypto flash crash, liquidity issues, government shutdown) are not long-term threats.
• Notes that since adopting the Bitcoin strategy, common shares have outperformed Nvidia, S&P 500, and even Bitcoin itself (when accounting for earlier gains).

"If your business is acquiring a volatile commodity like Bitcoin, then having permanent capital is an enormous advantage relative to the rest of the market."
— Mark Palmer [04:54]

3. Bearish Case — Vinny Lingam’s Critique

[05:22], [10:34], [17:13]

• Lingam questions the benefit to common shareholders (MSTR commons), observing that issuing high-yield perpetual preferreds erodes common shareholder value over time.
• The liquidity reserve created to cover interest/dividend payments was done at the expense of common shareholders.
• Dilution and “Waterfall” structure: Prefs are “vampiric” on the commons; as more prefs get issued to raise money, common’s value diminishes.
• Saylor’s timing is questioned (“buys every local top”), suggesting lack of market understanding and poor risk management.
• Notes the leverage in Strategy’s model magnifies upside but also exposes commons to wipeout risk if Bitcoin declines significantly.

"He is diluting one class of shareholders to pay four other or five other classes of shareholders. And that is a concern."
— Vinny Lingam [10:34]

4. Capital Structure Deep Dive

Explanation by Mark [07:54]

• Five perpetual preferreds, each structured for different investor segments.
• $7B in perpetual prefs outstanding and $8.2B in converts.
• Dividend + interest costs = ~$789M/year, but only $60M in software free cash flow.
• Recently created a $1.44B USD reserve to cover nearly two years of obligations.
• Prefs are giving fixed income investors yields (STRF ~9%, STRC ~11%), but they rank above commons in the payment hierarchy.
• Saylor's intent: replace all converts with prefs, making the capital base entirely permanent.

"Michael Saylor and his team have pioneered an entirely new asset class, which is Bitcoin-linked fixed income. And these perpetual preferred issues are the first ones that are out there in the market."
— Mark Palmer [08:21]

5. Bulls vs. Bears on Fiduciary Duty, Dilution, and Ponzi Comparisons

[10:30], [14:35]

• Lingam: “Not quite” a Ponzi but similar—new investors (common) pay off older ones (prefs).
• Mark counters: The dilution to fund the reserve was an “investment” in restoring confidence and facilitating Strategy’s ongoing plan.

"It kind of flies in the face of everything Saylor has been saying up to now, which is...don’t sell, don’t sell your Bitcoin, sell a kidney, use the money to buy Bitcoin. Now he has to hold cash."
— Vinny Lingam [11:44]

6. Assessment of Management, Mistakes & Learning Curve

[13:39]

• Mark: Saylor’s early mistakes (e.g., introducing margin-call risk in debt covenants) resulted in negative attention but have been corrected.
• The capital structure now avoids triggers, margin calls, and “FUD cycles” influencing the company.
• Lingam: These risk management mistakes were industry-orthodox errors, indicating Saylor's relative inexperience in crypto.

7. Impact of Regulatory Clarity & ETFs

[18:03], [22:47], [23:02]

• Palmer: With the “Clarity Act” and SEC support, institutional money is likely to enter at scale; Strategy stands to benefit.
• Past concerns that ETFs would erode Strategy’s value did not materialize—institutional trust in Strategy's structure may grow with regulatory greenlights.

"The Clarity act, like the Genius act, is a game changer. And I believe that Strategy is going to be one of the beneficiaries of that when it finally does get enacted."
— Mark Palmer [18:03]

8. Who Should Buy What?

[05:22], [24:49], [47:00]

• Vinny: If you want Bitcoin exposure, buy Bitcoin. If you want yield, buy the prefs. MSTR commons are “playing with fire” — offers leverage but also massive downside in flat/bearish cycles.
• Mark: At today’s levels, both prefs and commons are a “screaming buy” if you believe regulation and market conditions will improve.

9. Strategy’s Evolution: Lending & Income on Bitcoin?

[31:10], [32:41]

• CEO Fong Li hinted at possibly lending Bitcoin or even eventually selling to pay dividends (as a “last resort”).
• Mark: Considering new income avenues (e.g., lending BTC, generating income) is a rational evolution as market infrastructure matures. Other firms like MetaPlanet are actively using covered calls.

"The fact that the company is thinking about ways in which it could generate income from its bitcoin is, I think, just part of the evolution of this company's strategy and management's thinking."
— Mark Palmer [32:41]

10. Broader DAT Landscape & Consolidation

[35:25], [39:29]

• Only some DATs will survive; consolidation is likely.
• Strategy could, in theory, buy DAT companies trading below NAV, but Saylor seems hesitant due to complexity/transparency concerns.
• Vinny thinks the better move is to offer liquidity (e.g., put options on BTC) for DATs in distress rather than acquire messy companies.

"What Saylor has said from the get go is he wants a strategy that is fully transparent and very simple. So he's basically said at this point he does not want to do that."
— Mark Palmer [41:35]

11. Trading Practices & Accusations of Poor Execution

[42:55], [44:32]

• Vinny: Accuses Strategy of consistently “chasing the price up” when buying Bitcoin—claims they buy at tops and contribute to their own diminishing NAV.
• Mark responds: The company is not timing the market, is dollar cost averaging, and is focused on long-term accumulation, not trading.

12. Closing Remarks: Understanding the Risks

[46:55], [47:00]

• Mark: Strategy is evolving, has learned from mistakes, and stands ready to benefit from improved liquidity, catalysts like Clarity Act.
• Vinny: Most retail investors don’t understand the risk—they’re buying on passive autopilot (401ks, ETFs) without grasping the dilution/leverage dynamics. Systemic risk will only emerge when “the tide goes out.”

Notable Quotes & Memorable Moments

• Mark Palmer:
  “What are you doing here? You are establishing this reserve to address, you know, these concerns where, you know, the detractors of strategy had become quite vocal.” [10:57]

• Vinny Lingam:
  “If you want leveraged bitcoin exposure, you could buy some call options, which I think are a lot better than buying MSTR. I think MSTR is just sitting in a precarious situation where the prefs are, you know, sucking the blood out of it.” [05:22]

• Steve Ehrlich:
  “Saylor, I guess by design, famously buys at every local top.” [19:44]

• Vinny Lingam:
  “I just think it's dangerous for the long term and, and not to just dunk on Saylor. I think there's a lot of companies out there who are getting a stock purchase even though they don't deserve to have a purchase because of passive buying and ETF and fund buying and whatever else. So, it's just, it's a systemic risk I think that we have. And these risks are ones that only get uncovered when the tide goes out.” [47:00]

Key Timestamps

• [02:13] — Introduction of the episode’s primary focus and the guests
• [02:50] — Mark Palmer’s overview of Strategy’s recent struggles and capital structure
• [05:22] — Vinny Lingam’s bearish case and critique of the preferreds
• [07:54] — Detailed explanation of the cap table and the innovativeness of perpetual preferreds
• [10:30] — Discussion of dilution and whether Strategy’s model resembles a Ponzi
• [14:35] — Reflection on Saylor’s risk management and early mistakes
• [18:03]/[22:47] — Implications of regulatory clarity and ETFs
• [24:49] — The risks of leverage in up and down cycles
• [31:10] — Discussion of possibly lending/selling Bitcoin to generate income
• [35:25] — Applicability of Strategy’s model to other DATs and thoughts on consolidation
• [39:29] — Long-term view on MNAV and value-added activities in DAT companies
• [42:55] — Debate about the merits of acquiring DATs at discounts
• [44:32] — Vinny’s criticism of Strategy’s execution in Bitcoin buying
• [46:51] — Final thoughts and warnings to unsophisticated investors
• [47:00] — Systemic risk of autopilot investing in ETF era

Summary Table: Who Should Buy What? (As Discussed)

| Investor Goal | Mark's View | Vinny's View | Ticker/Instrument | |----------------------|----------------------------------|-------------------------------------------|-------------------| | Bitcoin exposure | Commons are a screaming buy | Just buy Bitcoin, not MSTR commons | BTC, MSTR | | Yield (income) | Prefs are a “screaming buy” | Prefs offer best yield, safest bet here | STRD, STRF, STRC | | Leveraged Bitcoin | Commons (if bullish on BTC) | Prefer call options for leverage | MSTR, Options |

Conclusion

This episode lays out a thoughtful bull-bear debate over whether Strategy’s preferred-dominated, highly-leveraged model is a true financial innovation or a potential ticking time bomb for common shareholders. Mark Palmer argues the capital base and regulatory tailwinds position the company for outperformance, while Vinny Lingam warns the waterfall structure and dilution could leave latecomers holding the bag if the Bitcoin cycle breaks against them—especially with retail investors often unaware of the risks. Both agree on the ingenuity and potential of the perpetual preferreds as a fixed-income instrument, but sharply diverge on whether the common stock remains a buy or a liability.

Essential takeaway:
Understand what you’re buying. Strategy’s approach is either an unmatched engine for Bitcoin accumulation or a dangerous house of cards, depending on your risk appetite and view of the next crypto cycle.