Bad news for Strategy (formerly MicroStrategy) and its preferred-stock holders, as the company's Bitcoin scheme starts to unravel after Bitcoin's drop.

• Strategy's board approved selling up to $1.25 billion of Bitcoin to raise cash, a reversal of Saylor's promise to never sell.
• The company is sitting on a $13 billion loss on its Bitcoin, and the stock has fallen with it.
• Saylor used to raise money by issuing new stock, but selling shares now tanks the price — raising $1 billion this past week knocked the stock down 21%.
• The cash is needed to pay dividends on its STRC preferred shares, which were supposed to be funded by Bitcoin going up, not down.
• STRC sits behind nearly $10 billion of Strategy's other debt, so its promised $100-per-share payout means little if the company runs short.

Outlook: If Bitcoin stays down, expect more Bitcoin sales and shrinking dividends as Strategy scrambles to cover its obligations.