Summary MSTX, the Defiance Daily Target 2X Long MSTR ETF, remains a 'Sell' after collapsing over 90% in the past year. The ETF’s structure amplifies downside as MSTR shares fall, with current price action risking delisting unless a reverse split occurs. MSTR’s balance sheet is stable until 2028, but its equity is highly sensitive to further bitcoin declines, driving continued bearishness. The fund’s shrinking AUM and persistent bitcoin bear market signal further downside for MSTX, with no near-term bankruptcy risk for MSTR. Thesis We last covered the Defiance Daily Target 2X Long MSTR ETF ( MSTX ) late last year, when we assigned the ETF a 'Sell' rating. The fund has collapsed since: Rating (Seeking Alpha) In our prior article, we outlined the mechanics of this leveraged ETF, and highlighted how, from a performance standpoint, the name was set for a very poor 2025. This year has been no different, and the current fund level could lead to a delisting. First things first - what does the fund do? As per its objective, the ETF provides for the 2x return of Strategy ( MSTR ) on a daily basis. The Defiance Daily Target 2X Long MSTR ETF (the “Fund”) seeks daily leveraged investment results of two times (200%) the daily percentage change in the share price of MicroStrategy Incorporated (Nasdaq: MSTR) (the “Underlying Security” or “MSTR”). Because the fund seeks daily leveraged investment results, it is very different from most other exchange-traded funds. It is also riskier than alternatives that do not use leverage. There is no guarantee that the Fund will meet its stated objective. The fund should not be expected to provide 2 times the cumulative return of MSTR for periods greater than a day. If MSTR moves lower in price, the ETF is set for a much lower price point, action that we have seen this year: Data by YCharts Strategy is down -29% in 2026, all while MSTX is down -56%. This year the name has done a bit better than the 2x performance on a longer time-frame, but do remember the ETF is set to replicate daily moves rather than longer periods. Delisting fears After a -96% price collapse in the past year, the ETF is now trading at $1.67 per share: Data by YCharts Many investors might not know this, but exchanges such as the Nasdaq (where MSTX is traded) have minimum price requirements : Perhaps no listing standard affects more companies than the $1.00 minimum bid price rule. When a stock's closing bid price falls below $1.00 for 30 consecutive business days, NASDAQ issues a deficiency notice, triggering a 180-calendar-day compliance period. Companies can regain compliance by maintaining a closing bid at or above $1.00 for 10 consecutive business days. While most ETF issuers avoid the delisting issue by performing a reverse stock split, one has to be mindful of the management here. MSTX's AUM has now plummeted to $157 M, thus, the fund is getting smaller by the day. We need to see another plunge in the MSTR shares for MSTX to break $1/share, but the fund management might look into doing a reverse split before that. Latest results from Strategy Since MSTX is a leveraged daily take on Strategy, let us look at the latest financial results from the company: MSTR Balance Sheet (Company Financials) Strategy now has $2.3 billion in cash on the balance sheet, with the stated goal to use that as a reserve in order to pay dividends on its preferred shares. The other line item that is large is represented by its bitcoin holdings, which now account for $58 billion in the balance sheet. The company's debt stands at $8.1 billion, and is mostly made up of convertible issuances. The convertible debt was issued with very low coupon levels, and it represented a play on a price appreciation in Bitcoin. The nearest maturity date for the converts is 2028: Converts MSTR (Author / Company) In its latest earnings call, the CFO of the company stated the following regarding the convertible debt: “In the extreme downside, if we were to have a 90% decline in Bitcoin price to $8,000, which is pretty hard to imagine, that is the point at which our BTC reserve equals our net debt and we’ll not be able to then pay off of our convertibles using our Bitcoin reserve and we’d either look at restructuring, issuing additional equity, issuing an additional debt. And let me remind you: this is over the next five years. Right, so I’m not really worried at this point in time, even with Bitcoin drops,” said Le . It's interesting to note that the common equity is the one bearing the brunt of any negative price actions here. In fact, the entire Strategy mantra is around issuing common equity to buy more bitcoin or to prop up reserves to pay for preferred shares. There is nothing on the balance sheet until 2028 that can cause a collapse here for Strategy as long as they do not use the massive cash reserves for further bitcoin purchases. In 2025 the company was one of the top issuers of equity: Equity Issuance (Company Financials) As a reminder, the cash raised via common shares was used to purchase more bitcoin and set up the cash reserve. On the income statement side, the company offers an interesting picture: Income Statement (Company Financials) Many people would be surprised to find out that Strategy has a healthy software business that made $477 M in revenue in 2025. When Bitcoin was taken out, the company posted a healthy $327 M gross profit figure. Its holdings in Bitcoin created an unrealized mark-to-market loss of $5.4 billion last year, mostly coming in Q4 2025. Unless the company is forced to sell its bitcoin, those losses will remain unrealized. And as we saw from the balance sheet, the company is in good standing until 2028 if it does not use its cash balance for anything else outside servicing its preferred shares. Given its large holdings in bitcoin, the Strategy common shares are a direct take on bitcoin; thus, further losses will result in lower common share prices. Furthermore, the market is embedding any default risk via the common shares as well, although we do not think that is warranted until late 2027. We are of the opinion that we have entered a bear market in Bitcoin, and the crypto coin has further to fall; thus, we are bearish on both crypto and the MSTR common shares. This means MSTX has further to fall, and unless the manager does a reverse split, the ETF will get delisted as share prices fall below $1/share. Conclusion MSTX is a 2x daily leveraged take on the MSTR common shares. The ETF is down over -90% in the past year. Based on the latest Strategy financials, we see the company having more downside as bitcoin prices move lower. While there is no bankruptcy risk given the balance sheet, the common equity is set for lower levels as Bitcoin continues in a bear market. MSTX might do a reverse split soon or be forced to delist as its share price moves below $1/share. We are still a 'Sell' for this name.
