The basic idea is to issue more equity to pay the prefs. So you dilute the equity by 11.5% and pay the pref 11.5% and in return you convert the incoming fiat to Bitcoin.

It's actually a great strategy aside from one major problem it only works if Bitcoin is going up and even if their models are correct and Bitcoin compounds at 20-30% over the next decade there is great risk during bear markets. The way to mitigate this risk would be to have a huge pile of cash or to have acquired the preferred funded Bitcoin at much lower prices. When Bitcoin is in a bear market no one wants to give MSTR money. They don't want to buy the common, lenders don't want to issue them more debt. So essentially if things get bad enough for long enough they will have to sell bitcoin to fund the preferred and maybe also to defend the $100 peg (the prefs paying 11.5% is meaningless if they have more than a few % vol because if I have to stomach a 10% decrease in the preferred equity plus pay tax on the dividend income I am down overall). If they have to sell a lot of Bitcoin to pay dividends and defend the peg it causes the price to crash more, their balance sheet becomes more unstable, the prefs become more volatile and risky and eventually the common equity becomes worthless. That is an extreme scenario and I don't think these products are big enough to cause that at this point.

I don't think we will end up in some doomsday scenario but I think much like the miners had to learn the hard way in early bear markets, financializers of bitcoin are going to have to learn the hard way and probably have to raise and hold much larger reserves during the bull markets. Maybe we will even see them add some gold to the balance sheet like tether did since it is less volatile than Bitcoin.