Take the Money and Run: Strategy Stock Looks Tapped Out

Key Points

• Strategy stock is being seen as riskier in today's market environment, despite the potential for rate cuts coming from the Fed, a warning sign for investors.
• Shorts are starting to pile up as the company gets discounted by markets due to weak fundamentals.
• The CFO is losing faith in the business model, hence a big chunk of stock was sold in the past month alone.

Interest rate cuts are often associated with accelerating most speculative behavior in the financial markets. The high likelihood of the Federal Reserve cutting rates this September 2025 is only amplifying those expectations further, which has many investors remaining hopeful that a stock like Strategy Inc. NASDAQ: MSTR will reach new 52-week highs. However, this might not be the case after all.

As the S&P 500 index, driven by the technology sector’s outperformance, begins to reach valuations not seen since previous speculative periods, all other risk assets are starting to follow this same behavior. Bitcoin is no exception, and this one can arguably be considered the leading indicator of all risk-appetite in the market, hence why it’s up by 18% on a year-to-date basis.

This potential overvaluation could trigger a rotation in the coming months and quarters, as lower interest rates could create new opportunities in the rest of the S&P 500 and other asset classes, areas that have been somewhat ignored in recent quarters. As money could begin to shift toward these areas, investors must de-risk their portfolios and start looking into quality. This factor isn’t found in Strategy’s business model.

Risk Built Upon Risk

The early days of Strategy were made by a pitch into the software industry, where the company promised to deliver value to shareholders by collecting revenue from its technology services. However, that quickly turned into a behemoth of a gambling machine.

There was no significant revenue from this space, nor any promises of future improvements. Instead, the company began issuing stock to the public and raising capital, which was then used to buy Bitcoin at the current market price, regardless of how costly the underlying asset might have appeared.

That’s a problem, because Strategy stock was essentially turned into a vehicle that holds Bitcoin on leverage, which isn’t much of a different story from an investor borrowing money to buy Bitcoin (one of the most volatile assets in the market).

Any credible risk manager would warn you that this poses a severe threat to your portfolio. Isn't it typical for those still possessing some common sense, yet not uncommon during market mania peaks? That being said, Strategy’s declining stance in the market could be an initial warning not only for the stock itself, but for all other risk assets.

Where the Market Puts Strategy Now

Over the past month, Strategy stock has declined by 16.5% to demonstrate to investors the shift in market sentiment toward this vehicle, but it doesn’t stop there. The market is now sending a subtle message about how it truly feels regarding Strategy and its future.

The software industry now trades at an average price-to-book (P/B) ratio of 11.1x, whereas Strategy stock has fallen to a steep discount of only 4.5x in terms of P/B. Experienced investors will admit that the market is often right when assigning premiums and discounts to certain industries and stocks.

With this fact on the table, the translation for retail investors is that the market is not willing to pay a fair value for Strategy’s book value, which, in essence, is mostly made up of debt and cash collected from diluting investors quarter after quarter, not to mention Bitcoin.

In this scenario, it makes sense not to pay up for Strategy, as the only valuable thing in its balance sheet is Bitcoin, but that’s something investors can buy on their own without running the risk of irresponsible leverage behind it, not to mention being exposed to further dilutions, which hurt their ownership and the stock price as well.

All told, it seems some participants have started to place their bets on this house of cards, hoping that the Fed’s decision in September could act as the wind that knocks it all down. An increase of 3.2% in Strategy’s short interest says it all; bearish traders are gearing up for what they expect could be a profitable view in the coming months and quarters.

An even more powerful message is being received by the company’s CFO, Andrew Kang, who decided to sell roughly $7.4 million worth of stock in August 2025, all for $395 per share (awfully close to the top). This isn’t a sign of confidence, but another potential capitulation from a company insider who is losing faith in the model itself.