- Peter Schiff says Strategy’s business model could collapse if investor demand weakens
- Arca CIO Jeff Dorman rebuts claims about Strategy’s risk of forced Bitcoin liquidation
- Dorman highlights positive cash flow and strong governance protecting Strategy’s treasury
Arca’s chief investment officer, Jeff Dorman, has pushed back against fresh concerns about Strategy’s financial stability. His comments came after high-profile critic Peter Schiff warned that Strategy could face bankruptcy if Bitcoin prices continue to fall.
Bitcoin Critic Question Strategy’s Stability
Dorman said the fears are not supported by the firm’s balance sheet or its debt structure. He dismissed claims that Michael Saylor’s firm could be forced to sell Bitcoin during the current market downturn.
Strategy has come under scrutiny as its stock price dropped over 33% this year. Also, Bitcoin recorded slight gains within the same period. Schiff argued that the company’s business model depends on income-focused investors who may stop buying its preferred shares.
Hence, the company’s structure could enter a death spiral if investor demand fades. He also challenged Saylor to debate him at Binance Blockchain Week in Dubai.
Dorman disagreed, saying the claims are misleading. He argued that Strategy’s board and its debt terms help protect the company from any forced Bitcoin sales. He emphasized that none of the firm’s outstanding debt requires liquidation of Bitcoin to service interest or principal payments.
Also Read | Michael Saylor Predicts Bitcoin Will Outshine Gold’s Market Cap by 2035
Dorman Highlights Strategy’s Treasury Strength
The Arca executive also noted that companies rarely default just because a debt maturity is approaching. In many cases, lenders simply extend the terms in what is often called the “extend and pretend” strategy.
According to Dorman, the software business by Strategy is still producing positive cash flow. It is that cash that the company uses to maintain its Bitcoin treasury and reduce the chances of a liquidity crunch.
Strategy shares are listed at approximately 1.04x of its diluted market net asset value, per StrategyTracker. The share price is a little bit higher than the estimated equity value of its BTC holdings after factoring in any share dilution in the future.
Strategy is no longer a significant buyer of BTC as spot ETFs have taken the lead. Its Bitcoin treasury has become one of the biggest in the world. Hence, institutional and retail investors are paying close attention to its actions.
Also Read | Strategy Maintains BTC Position Despite $1 Billion Market Sell-Off Speculation
