Influential economist and market commentator Peter Schiff expressed concerns over Strategy Inc.‘s MSTR convertible debt offerings on Wednesday, hinting at potential financial troubles for the Bitcoin BTC/USD treasury company.
What Happened: Schiff took to X to highlight the 4.5% decline in the company’s shares despite Bitcoin’s gain of 2.5%.
“It looks like the new MSTR convertible notes aren’t going over too well,” Schiff wrote
Schiff suggested that if the company’s shares continue to trade at a discount to its Bitcoin holdings, it could lead to a negative Bitcoin yield.
The Michael Saylor-led firm introduced the “Bitcoin Yield” metric last year which measures the percentage change in the number of Bitcoins it owns per share over a period of time. According to the MSTR tracker, the Bitcoin yield was 4.14% as of this writing.
See Also: Bitcoin ‘Early In Bull Market,’ Can Compete With Gold ETFs, Blockstream CEO Says
Why It Matters: This isn’t the first time Schiff has expressed skepticism about Strategy’s convertible debt approach to fund Bitcoin purchases.
In November of last year, he argued that the company’s commitment to repay a large sum of money to debt holders could be at risk if Bitcoin drops significantly, leading to a potential bankruptcy.
A convertible note is a hybrid instrument that can be exchanged for equity in the company at a later date. The conversion feature of these notes eventually helps the debt holders to participate in the equity upside on conversion.
Strategy has been one of the most aggressive corporate investors in Bitcoin, holding a stockpile worth over $46.5 billion, according to bitcointreasuries.net. Earlier this week, the company announced plans to issue $2 billion in convertible debt to buy more Bitcoin.
Price Action: At the time of writing, Bitcoin was exchanging hands at $97,095.53, up 1.55% in the last 24 hours, according to data from Benzinga Pro.
Shares of MicroStrategy were up 1.21% in after-hours trading, after closing 4.58% lower at $318.67 during Wednesday's trading session, according to data from Benzinga Pro. Year-to-date, the stock has gained 10%.
Image via Shutterstock
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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