Ripple CEO Garlinghouse calls Saylor's bitcoin funding model a 'damning indictment'

Ripple’s chief executive, Brad Garlinghouse shared doubts about whether Strategy’s CEO Michael Saylor has been a positive influence on the broader crypto market during a Friday interview with CNBC.

Garlinghouse specifically described the untethering of Strategy’s Stretch (STRC) preferred stock as a “damning indictment. However, the Ripple chief executive maintained that he remains bullish on Bitcoin, regardless of Saylor or anybody.

What did Ripple’s CEO say about Strategy’s preferred stock slide?

Ripple’s CEO Brad Garlinghouse singled out Strategy’s STRC perpetual preferred stock, which has been on a sustained slide below its $100 target, as evidence that Michael Saylor and Strategy had started to lose the plot during a CNBC interview on Friday.

The way it was designed, STRC is supposed to hold near its $100 par value while paying an 11.5% annual dividend. However, it’s well below those levels, sitting at $74.57 when markets closed for the weekend.

That 26% discount, according to Garlinghouse, is “a pretty damning indictment.”

“Financial engineering does not drive long-term value,” Garlinghouse said during the interview. “Team Michael Saylor wasn’t focused on the right stuff and that has hurt the overall market.”

Garlinghouse’s comments did not do Strategy any favors, piling on a company that has seen its common shares fall to their lowest level since February 2024, closing near $82 on Friday, while its primary reserve asset also dipped to $59,000.

Garlinghouse also flagged Strategy’s leverage damage

Garlinghouse also talked about how the leverage game that Strategy played to amplify gains on BTC’s rallies is now leaving deep wounds on the way down. “You start to see that in a place that can actually compound negatively,” the executive told CNBC.

Annualized dividend obligations across Strategy’s preferred share classes have grown to roughly $1.2 billion. Strategy’s own disclosures show it is not ignorant of the financial pressure.

The late May sale of 32 Bitcoins for $2.5 million to fund a dividend payment became bigger news than usual for a firm that still had 843,706 BTC that it paid nearly $64 billion for in reserve. That sale was also the first time the company liquidated any of its holdings since at least December 2022, per Cryptopolitan at the time.

The financial pressure is not lost on other market stakeholders either. CryptoQuant’s head of research Julio Moreno estimated that the firm’s runway on dividends has gone from more than seven years to approximately just 14 months, per Cryptopolitan reporting.

CryptoQuant recommended in a separate report that Strategy hit the brakes on buying Bitcoin for a bit to beef up its cash reserves.

What did Garlinghouse recommend for Bitcoin?

Garlinghouse made sure to separate his perspective on Bitcoin from Saylor’s Strategy. The Ripple CEO maintained his long-term bullish view of “digital gold.” His criticism was strictly directed at Strategy’s approach and funding structure.

Garlinghouse was basically reading out of the Ripple handbook when he said utility will tether a digital asset’s long-term value. He pointed to Ripple’s XRP-powered cross-border payment infrastructure, which processed nearly $16 trillion in payment and prime brokerage volume last year, as an example.

How has Saylor responded to skeptics?

Saylor has not shown any signs of letting up on the Bitcoin-first playbook as of yet. Cryptopolitan reported on the CEO’s defiant tone during the week after CryptoQuant and Peter Schiff hinted at impending problems for the firm.

Earlier in the week, he also promoted the STRC instrument when he posted that “Digital Credit is income for investors who believe in Bitcoin.”

Strategy is down about $13 billion on the cash it paid for its over 847,000 BTC stash, according to BitcoinTreasuries data cited by Cryptopolitan.

Ironically, Saylor is now down about 25% on the dollar cheque he wrote for every BTC that Strategy has bought, the same rate the STRC preferred stock currently trades below par value.

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