A former Goldman Sachs credit portfolio manager suggests the market is mispricing the STRG preferred shares of "Bitcoin proxy" company MicroStrategy (MSTR.US). According to his latest analysis, the shares are worth approximately $96, compared to their current trading price near $85.

Khing Oei, a seasoned credit investor with 25 years of experience in valuing high-risk debt at Goldman Sachs and hedge funds, recently shared his detailed valuation model for STRG in an extensive discussion. He questions why the quoted 14% yield on MicroStrategy's STRG preferred shares is misleading. While STRG pays a 12% dividend, dividing this by the current discounted share price yields a figure over 14%, a number widely cited. Oei contends this calculation is flawed because it assumes STRG will pay dividends perpetually regardless of circumstances, which is not a guaranteed commitment. The security has no maturity date and the company is not obligated to repay the $100 per share par value. Dividends are only paid if MicroStrategy can afford them. During a Bitcoin sell-off in June, the shares fell to a level 25% below par, making their yield appear particularly attractive.

In his report, Oei writes, "This experience should instill a simple intuition: never value a stream of future cash flows by dividing this year's coupon by today's trading price." Consequently, he values STRG like a bond, calculating only the cash flows it can realistically pay. MicroStrategy's corporate data shows it holds 843,775 Bitcoin (BTC) valued at $54 billion and $3 billion in cash. Debt and higher-ranking preferred shares have first claim on $8 billion of this, leaving $10.5 billion of assets backing the STRG issue.

From Oei's perspective, the purported 13% undervaluation of STRG is not a simple credit arbitrage independent of Bitcoin. Instead, it reflects the market's long-term excessive pessimism regarding Bitcoin's future price trajectory, MicroStrategy's asset coverage capability, and the sustainability of its dividends. The current market price of around $85 for STRG implies only about 17 years of dividend payments. However, after accounting for MicroStrategy's Bitcoin and cash holdings and deducting senior claims, Oei calculates the remaining assets could theoretically cover approximately 29 years of dividends even if Bitcoin's price never increases again. If Bitcoin grows at a modest annualized rate of about 3.4%, the dividend model could be sustained indefinitely. Discounting these 29 years of payments at a 12% rate yields a fair value estimate of $96.30.

BeInCrypto analysts have verified this calculation, confirming its validity. The market's current price is $85.29, which essentially prices in only 17 years of dividends. Oei considers this expectation overly pessimistic, noting that STRF, a higher-priority, lower-risk preferred share from MicroStrategy, offers a yield of only 10.4%. The gap between $85 and $96 represents a 13% pricing discrepancy. This leads to a clear conclusion: if Oei is correct, buyers can secure a 14% yield while waiting for the price to converge toward fair value; if the market is correct, the discount serves as a warning that dividends may eventually be suspended.

Some buyers appear to align with Oei's view. A survey by BitcoinTreasuries found over half of holders chose to buy the dip after the share price fell below par.

Path Back to $100

Bitcoin's price plays a decisive role. According to Oei's model, if Bitcoin rises to $80,000, STRG could return to $100; if it falls to $40,000, STRG could drop to around $58. MicroStrategy itself has some levers to pull. STRG was issued in July 2025 at $90 with an initial 9% dividend yield. The board has since incrementally raised the yield to the current 12% to help push the share price toward par.

Cash reserves also play a part. Oei estimates that for every $1 billion the company raises and retains as a reserve, STRG's valuation could increase by about 4 points. Share buybacks could add about 5 points, as MicroStrategy could repurchase shares he values at $96 for only $85. The pricing discrepancy itself becomes one of the company's lowest-cost tools. Growing cash reserves also align with what some research teams call a "positive pivot strategy for a Bitcoin winter."

It is important to note a potential conflict of interest: Oei runs Treasury, a European-based Bitcoin reserve company, and thus stands to benefit if such securities gain broader market acceptance.

Skeptics remain. Economist Peter Schiff recently predicted Bitcoin could plummet to around $20,000. Others question who would bear the cost if MicroStrategy's massive $64 billion bet ultimately reverses. Since hitting a peak above $126,000 in October of last year, this pioneering cryptocurrency has lost about half its value, falling to levels not seen since September 2024. Banking giant Citigroup recently downgraded its 12-month Bitcoin forecast from $112,000 to $82,000, citing negative ETF flows, slow legislative progress, and waning investor interest. Its Ethereum forecast was also cut.

The current crypto downturn differs from past "event-driven winters" triggered by exchange failures, extreme leverage unwinding, or project fraud. It more closely resembles a slow, profound demand ebb. Bitcoin has fallen sharply from its October highs above $126,000 to around $64,000 currently; Ethereum, at about $1,877, has performed even weaker, indicating capital is exiting not just "digital gold" but also reducing overall allocation to smart contract ecosystems and high-volatility crypto beta.

The core question now is simple: should a company with $57 billion in assets face such severe skepticism over annual dividend payments of $1.73 billion? The future path of Bitcoin will largely provide the answer.