Saylor crypto imitators are now under pressure as doubts grow about their business model

Enthusiasm for Michael Saylor’s Strategy (MSTR) — and some of its numerous imitators — has been fading, with the stocks for some of those companies tumbling over the past month.

Strategy’s stock has fallen roughly 4% in that time, underperforming bitcoin, which is up 3% over the past 30 days. The company piled into a bet on bitcoin starting in 2020, using a combination of debt and equity to fund massive purchases of the cryptocurrency that turned the business intelligence software firm into a bitcoin juggernaut. Despite lagging recently, the stock has seen a surge of 2,800% since it first started buying bitcoin.

Imitators have tried to replicate Strategy’s model.

Firms in industries outside of crypto have pivoted to bet on bitcoin in the hopes of replicating its stock price success. But some of those imitators have suffered steep losses. For example, Japanese hotel management firm-turned-bitcoin holding company Metaplanet (MTPLF) saw shares plummet more than 36% over the past month, healthcare data provider Kindly MD (NAKA) has shed 87%, and health tech firm Semler Scientific (SMLR) is down nearly 12%.

Trump Media & Technology Group (DJT), the company in which President Trump is a majority stakeholder and that recently launched a bitcoin treasury, has seen shares fall 8%.

And a vehicle spun up by New York investment bank Cantor Fitzgerald (CEP) has dropped 17%. It will soon take public a bitcoin treasury company called Twenty One Capital, backed by Japanese software firm SoftBank (SFTBY) and major stablecoin issuer Tether.

These firms saw wild stock surges earlier this year — and the recent reversal heaps doubt on whether the boom in bitcoin treasury stocks will last.

“[A]t a certain point there are too many strategies pursuing the same promised land and a finite amount of investor demand for similar exposures,” Monness, Crespi, Hardt & Co. analyst Gus Galá told Yahoo Finance in an email.

A surge in crypto prices, a change in US accounting rules, and the Trump administration’s far more favorable regulatory stance toward crypto have all helped boost the craze for public companies pivoting to imitate Strategy’s playbook.

The draw for investors to crypto treasury stocks is “simple,” according to television personality and crypto investor Kevin O’Leary.

“The majority of the market can’t hold bitcoin, but they can hold equities,” O’Leary said.

He said that even with the launch of bitcoin exchange-traded funds, certain institutional investors, given their investment mandate, prefer directly holding stocks.

For instance, the world’s largest sovereign wealth fund, Norway’s Norges Bank, doesn’t hold bitcoin or related ETFs, but it does hold approximately 2.9 million shares of Strategy as of its second quarter disclosure. So do multiple US state retirement and pension funds, including the country’s largest, the California Public Employees’ Retirement System (CalPERS).

More than 180 public companies have added bitcoin to their balance sheet to date, many of them launching within the past year, according to data provider BitcoinTreasuries.net. Collectively, they hold 5% of bitcoin’s total supply. Of those firms, some 94 are considered imitators of Strategy — based on their size, business model, and how they fund their bitcoin purchases, according to Vetle Lunde, head of research for Oslo, Norway-based crypto market research firm K33.

“The performance of some of these stocks earlier this summer was just mind-blowing,” Lunde said, noting the recent downturn in some of them. “It’s been just a very wild ride, and now I think the bitcoin treasury space is getting quite saturated,” Lunde added.

Of the 94 Strategy imitators, roughly 25% have market capitalizations that have sagged below the value of their bitcoin holdings, according to K33 Research. For these companies, it’s a poor signal from investors — collectively, investors view these companies as less valuable than the bitcoin they hold, according to Lunde.

Read more: Can you buy crypto with a credit card? See the pros and cons.

If that negative pattern were to continue, it could become self-perpetuating, opening the door to shareholder unrest or even the forced selling of bitcoin, Lunde said.

Even Strategy itself is facing a mounting pile of doubters, including legendary short seller Jim Chanos, who is famous for questioning Enron’s financials before its collapse in 2001. Strategy’s doubters say the company’s stock shouldn’t be more expensive than bitcoin, as it currently is.

“It makes kind of no sense,” Chanos said in an interview on Bloomberg’s “Odd Lots” podcast this summer.

Galá, of Monness, Crespi, Hardt & Co., told Yahoo Finance that Strategy is running out of options to keep funding its bitcoin purchases. Strategy mainly relies on issuing debt to fund its buying sprees, and chair Michael Saylor’s pitch to bond investors is that the common stock’s volatility makes the “option” embedded in its convertible debt — the right investors get to swap bonds for stock if the share price jumps — more valuable.

But Galá said implied volatility is waning, complicating Strategy’s sales pitch. Its latest convertible bonds have conversion prices that are higher than the stock’s current level. For example, Strategy’s convertible bond issued in late 2024 only becomes attractive if shares nearly double to their conversion price of $672. Those bonds are trading below par, or less than 100 cents on the dollar, per Bloomberg data.

At the same time, the company’s prospects of issuing investment-grade debt are “tough,” given that its “entire base of profits is unrealized gains.” And a path that includes issuing more equity will lead to the dilution of Strategy’s shares, making them less valuable. All of that makes it difficult for Strategy to proceed unfettered, he said, especially if the value of bitcoin slips.

“It all works as long as bitcoin goes up … But then when bitcoin stops doing that — if it stops doing that — it stops working,” Galá said.

Galá said his concerns about Strategy are amplified for smaller companies attempting to imitate its business model, “especially those without a core operating business and primarily earning through unrealized gains” on their crypto investments.

He said those smaller copycats “are likely to struggle more” to raise capital, market themselves as Michael Saylor has marketed Strategy, and drive premiums to their stocks’ multiples.

To be sure, not all Strategy imitators are down. American Bitcoin, the bitcoin mining and treasury company co-founded by Eric Trump, is up 16% over the past 30 days, while online video game retailer GameStop is up 12%.

Even those companies hit hard by the recent turmoil in crypto stocks remain committed.

Noting the “extreme volatility” seen in the company’s stock price over the past month, KindlyMD CEO David Bailey wrote to investors last week, “The entire public Bitcoin treasury space has been tested in recent months, yet this is exactly when conviction matters most.”

David Hollerith covers the financial sector ranging from the country’s biggest banks to regional lenders, private equity firms, and the cryptocurrency space.

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