The Strategy Stock Conundrum: A Valuation Puzzle Amid Bitcoin Holdings and Index Uncertainty

Strategy's shares are attempting to recover from a challenging period, trading higher after hitting recent lows. The investment case currently hinges on two pivotal elements: a significant dividend increase for preferred shares and a perplexing valuation gap when compared to the firm's massive Bitcoin treasury. The central question for investors is whether the enhanced payout mitigates concerns over regulatory scrutiny and potential index exclusion, or if broader market skepticism will prevail.

A core aspect of Strategy's valuation remains its deep ties to Bitcoin. The company's holdings currently stand at 672,497 BTC. Notably, between December 22 and 28, 2025, it purchased an additional 1,229 Bitcoin for approximately $109 million. With Bitcoin trading above $90,000, the market value of these reserves approaches $60 billion.

This creates a striking scenario: the company's market capitalization is cited in the article's context at around $47 billion, which is substantially below the value of its Bitcoin holdings. This implies the market is effectively assigning a zero or even negative value to Strategy's operational business. In technical terms, the mNAV (Market-to-Net Asset Value) is near or below 1.0—a level typically indicative of extreme investor caution regarding potential forced liquidations or structural risks within the business model.

Preferred Stock Dividend Hike

The company has drawn attention with a change in its distribution policy for preferred shares. Effective January 1, 2026, Strategy has raised the annual dividend rate for its Variable Rate Series A Perpetual Stretch Preferred Stock from 10.75% to 11.00%.

Specifically, a cash dividend of $0.916666667 per preferred share has been declared for the monthly period ending January 31, 2026. The payment date is set for January 31, with the record date being January 15.

While this action directly benefits holders of the preferred equity, it sends a broader signal. Management is reaffirming its commitment to yield-oriented instruments despite the considerable volatility experienced by the common stock throughout 2025. Market observers interpret this as a move to retain income-focused investors and bolster confidence in the firm's capital structure.

Recovery from Annual Lows and Technical Pressure

The share price remains well below its previous peaks. After establishing a new 52-week low of $135 in December, the stock has seen a modest rebound, closing at $157.04 this past Friday—a daily gain of 3.35%.

Should investors sell immediately? Or is it worth buying Strategy?

Even with this recovery, the equity still trades approximately 60% below its 52-week high and remains beneath key long-term moving averages. Its 12-month performance, down roughly 46%, underscores the persistent pressure. An elevated RSI and high 30-day volatility further point to a nervous, speculation-driven trading environment.

Looming MSCI Reclassification Threat

A significant overhang is the pending decision by index provider MSCI, expected in January. The review may lead to a reclassification of firms with substantial crypto exposure. For Strategy, this could result in being categorized more as a "Fund" rather than an operating company.

Such a reclassification and subsequent exclusion from certain indices could trigger substantial forced selling by passively managed funds. Analyst estimates suggest potential selling pressure of up to $8.8 billion. This regulatory uncertainty is likely a primary reason the stock has recently significantly lagged the performance of Bitcoin itself.

Options Activity Bets on Short-Term Rebound

Despite the weak annual performance, speculative interest in a near-term rally is evident. Notable activity was observed in the options market on January 2, particularly in short-dated call spreads.

One illustrative trade involved a call spread expiring January 9 (with strikes at $157.5/$165). Buyers of this position reportedly saw gains of about 74.5% in a single day as the stock rallied sharply off its daily lows. Such trading patterns indicate that some market participants are anticipating heightened short-term volatility or a relief rally, potentially ahead of the MSCI announcement.

Outlook: A Period of Heightened Volatility

The coming weeks appear critical for Strategy. The company is expected to report a significant loss for the fourth quarter of 2025, largely driven by impairment charges related to Bitcoin price fluctuations during that period. Simultaneously, the impending MSCI decision, expected by January 15, hangs over the stock and could generate considerable selling pressure if the outcome is unfavorable.

Conversely, the increased 11% dividend on preferred shares offers a clear incentive for yield-seeking investors and provides stability to that segment of the capital stack. Taken together, the evidence suggests the stock will likely remain in a state of high volatility until clarity emerges on the index classification and the Q4 results are published, with news flow regarding regulation and Bitcoin prices serving as the primary directional drivers.