The 13% Mispricing: Ex-Goldman Analyst Calls Market Too Bearish on MicroStrategy's Bitcoin-Backed Preferred Stock

A former Goldman Sachs credit specialist is publicly challenging the market's valuation of MicroStrategy's preferred stock, arguing it's being priced for a worst-case scenario that ignores the company's massive bitcoin buffer. Khing Oei, a veteran with decades in distressed debt, claims the STRC preferred shares are trading at a 13% discount to their fair value. This isn't just a number-crunching exercise—it's a bet on whether the market has correctly assessed the durability of a company that has bet its entire balance sheet on bitcoin. As someone who spent 2017 auditing ICO whitepapers for hidden centralization risks, I recognize a familiar pattern: when a narrative of fear takes hold, fundamentals often get overlooked. Oei's analysis deserves a close read, not because it's right, but because it exposes a rare collision between traditional fixed-income logic and the volatile world of crypto treasury management. MicroStrategy, now rebranded as Strategy, holds 843,775 bitcoin as of late 2025, alongside $3 billion in cash. In July 2025, it issued a new class of preferred stock—STRC—with a par value of $100 and a 12% annual dividend. Unlike common stock, preferred shares have a fixed claim on dividends and assets in liquidation, ranking above common equity but below debt. STRC has no maturity date; the company only pays dividends when its board declares them. This means the stock's value is entirely dependent on the company's ability to generate cash flows from its operations and bitcoin holdings. The market currently prices STRC at around $85.29, implying a dividend yield of roughly 14% based on the $12 annual dividend. But Oei argues that yield calculation is misleading. 'You should never value a preferred stock by dividing this year's dividend by today's price,' he states. Instead, he applies a discounted cash flow model that looks at the entire stream of future dividends, discounted at 12%—the same rate the company pays to raise capital. His conclusion: fair value is $96.30 per share. The discrepancy stems from how long the market expects the dividends to last. At $85, the implied duration is about 17 years. Oei's model, using conservative assumptions about bitcoin's growth and the company's other cash flows, suggests dividends could be sustained for 29 years or more. This gap—12 extra years of income—is the source of the 13% mispricing. Let's unpack the numbers. Oei's model relies on four key inputs: current bitcoin holdings, bitcoin's long-term price appreciation, the company's operating cash flow from its software business, and the dividend payment requirement. According to his research, MicroStrategy's total assets—bitcoin at current market prices plus cash—exceed $70 billion. After subtracting all liabilities and preferred equity, there is roughly $50 billion in cushion supporting the $10.5 billion in preferred stock. That's a coverage ratio of nearly 5x. Even if bitcoin's price stayed flat, Oei calculates the company has enough cash and securities to pay the full dividend for 29 years without selling a single bitcoin. To be precise, he assumes 0% bitcoin growth and still gets 29 years. If bitcoin grows at a modest 3.4% annually—well below its historical average—the dividend becomes self-sustaining indefinitely. But this is where the market's skepticism kicks in. The 29-year model assumes no change in corporate strategy—no dividend suspension, no additional share issuance that dilutes coverage, no catastrophic drop in bitcoin below $40,000. Oei himself provides a sensitivity table: at $80,000 bitcoin, STRC would trade near $100 par; at $40,000, it would fall to $58. That's a 42% decline from the current price if bitcoin halves. The market, by pricing STRC at $85, seems to be assigning a probability to exactly such a scenario. Over half of STRC holders bought below par, suggesting many already anticipate risk. The key insight Oei offers is not that the market is wrong, but that it may be overestimating the probability of disaster. He notes that the company's management has a strong incentive to keep the dividend going—it allows them to raise cheap capital (12% is low for a company with this much optionality). Moreover, the flood of new preferred issuance in 2025 was partly driven by a market looking for high-yield, bitcoin-linked products. The buyer base includes yield-hungry institutions that may not be as reactive to bitcoin volatility as the market assumes. In my experience covering both the ICO era and the DeFi summer, I've seen how a single strong narrative can distort pricing for months. Today, the narrative around MicroStrategy is dominated by fears of a 'levered bet gone wrong.' Oei's analysis offers a counter-narrative: that the worst-case assumptions already priced in are too grim. But is he right? Let's look at the contrarian case. Truth over hype. Always. Oei's model has a fundamental flaw: it treats MicroStrategy's cash flows as predictable when they are anything but. The company's software business is mature and stable, but its real engine is bitcoin appreciation. If bitcoin enters a multi-year bear market, the coverage ratio shrinks fast. At $30,000 bitcoin, total assets fall to around $28 billion—still above liabilities, but the cushion shrinks to about $18 billion. That still covers the preferred dividend many times over, but it changes the psychology of management. Michael Saylor has shown he will do whatever it takes to accumulate more bitcoin, including diluting shareholders. If the preferred dividend becomes a drag, he could simply suspend it. The STRC prospectus allows that. The market may be pricing in not just a bitcoin crash, but a rational management decision to prioritize bitcoin buying over fixed-income obligations. Another blind spot: the model assumes the 12% discount rate is correct. But if interest rates rise or MicroStrategy's credit profile deteriorates, that discount rate should increase, lowering fair value. Oei uses the rate at which MicroStrategy raises capital, but that rate changes. Finally, there is the 'Saylor risk'—the founder's aggressive personality. If he were to leave or face legal trouble, the entire strategy could unwind. The market is not stupid; it is pricing in these tail risks. The 13% discount may be exactly right for a security that, while well-collateralized, is only one bitcoin crash away from becoming a speculative instrument. As I always say, 'Trust is the only currency that matters.' MicroStrategy has earned trust from bitcoiners, but has it earned trust from preferred stock investors? The market says not yet. So is the STRC mispricing a gift or a trap? It depends on your view of bitcoin's long-term trajectory. If you believe $80,000 is the floor, then $85 STRC offers a 12% yield with upside to $100. If you think bitcoin could revisit $40,000, the implied downside is severe. Oei's analysis is a useful check on groupthink, but it is not gospel. The next narrative shift—whether bitcoin breaks out or breaks down—will settle the debate. Until then, 'Noise filtered. Signal preserved.' The signal here is that traditional finance is finally applying rigorous models to crypto derivatives. That alone is worth watching.