Garlinghouse: Financial Engineering Does Not Create Long-term Value
Ripple CEO Brad Garlinghouse expressed clear criticism of Strategy's financing strategy in a CNBC interview. According to CoinDesk, he remains bullish on Bitcoin but believes that Strategy's model of buying Bitcoin through preferred stock issuance has 'already damaged the crypto market.' Garlinghouse emphasized: 'Financial engineering does not drive long-term value,' and argued that the long-term value of any digital asset comes from its utility. He stated bluntly: 'The Michael Saylor team is not focused on the right things, and that has hurt the overall market.'
Strategy's Financing Mechanism Faces Market Rejection
The core of Garlinghouse's criticism is Strategy's preferred stock financing mechanism used to accumulate Bitcoin. Over the past year, Strategy has raised funds by issuing preferred shares (ticker STRC) to continue buying Bitcoin. STRC carries an annual dividend rate of 11.5% and was designed to trade near $100. However, STRC is currently trading about 25% below par value. Garlinghouse called this a 'strong rejection' of the strategy. Data shows STRC hit an all-time low on Thursday, at one point trading 26% below par. Meanwhile, Strategy's common stock fell to its lowest level since February 2024, closing around $82 on Friday, while Bitcoin dropped below $59,000.
The pressure on Strategy's financing model intensified this week. On-chain analytics firm CryptoQuant suggested that Strategy should pause Bitcoin purchases and rebuild its cash reserves. STRC's dividend payment coverage period has shortened from over 7 years to approximately 14 months. When STRC falls below $100, the mechanism of issuing stock to buy Bitcoin stalls, which is why the company has suspended this mechanism.
Analyst Divergence: Less Efficient or Completely Broken?
Benchmark-StoneX analyst Mark Palmer holds a different view. He believes Strategy's financing engine has merely become 'less efficient' rather than broken, and opposes comparing STRC to assets that have completely collapsed. Market participants are closely watching Strategy's next financing moves and their impact on Bitcoin market sentiment.