Strategy Inc (NASDAQ:MSTR) has unveiled a controlled mechanism to sell bitcoin while also authorizing share buybacks, but investors are closely watching the pace of dilution as the company navigates its capital management strategy. The board's plan, announced Monday, permits bitcoin sales to bolster cash reserves and repurchases of up to $1 billion in common shares and $1 billion in preferred shares.
Before the U.S. cash market opened Tuesday, MSTR shares last traded at $92.68, while bitcoin was quoted at $59,085. At current bitcoin prices, the $1.25 billion sale authority equates to roughly 21,156 BTC, representing about 2.5% of Strategy's total 847,363-BTC reserve.
Key Financial Metrics
- USD Reserve: $2.55 billion, enough for 17.4 months of preferred dividend and interest payments
- Annual Preferred Dividends and Interest: $1.76 billion, or approximately $146.7 million per month
- Board-Authorized Bitcoin Sales for Reserve: $1.25 billion, covering about 8.5 months of current obligations
- Total Stated Liquidity Coverage: $3.80 billion, sufficient for 25.9 months before taxes, fees, and market fluctuations
- Common Buyback Authorization: $1.00 billion, representing 3.2% of the company's market cap
- Preferred Buyback Authorization: $1.00 billion, potentially reducing cash needed for dividends if repurchased below par
Recent Funding Activity
A key data point for traders is the gap between the new buyback headlines and last week's share sales. According to a June 29 filing, Strategy sold 12.67 million MSTR shares for $1.152 billion net in the week ending June 28. The company did not purchase any bitcoin during that period and still had $24.26 billion available to raise through its Class A common stock ATM program.
The filing also revealed that Strategy's bitcoin reserve cost stands at $64.10 billion, with an average purchase price of $75,651 per coin. At the current bitcoin price of $59,085, the stash is valued at approximately $50.07 billion, representing an unrealized loss of roughly $14.03 billion before tax and accounting considerations.
Management Commentary
Executive Chairman Michael Saylor reiterated in a statement that "Strategy remains committed to Bitcoin as its primary treasury reserve asset." CEO Phong Le noted the company is "evolving from one-way capital issuance to active capital management," while CFO Andrew Kang succinctly stated, "Bitcoin is capital."
Benchmark analyst Mark Palmer told The Block that Strategy is now "an active manager of both sides of its capital structure." Benchmark maintained its Buy rating and $570 price target, which is approximately 515% above Monday's close of $92.68.
Preferred Stock Focus
Strategy's preferred stock (NASDAQ:STRC) is under scrutiny as the company aims to keep it near the $100 par value. The firm increased the STRC dividend to 12% starting July 1 and plans to revisit the rate monthly, monitoring the stock's trading level, credit spreads, bitcoin price and volatility, reserve coverage, and overall capital market conditions.
For common shareholders, the investment thesis now extends beyond simply tracking bitcoin's price. It increasingly involves calculating reserve coverage and dilution risk. The new $1 billion buyback authorization is notably smaller than the $1.152 billion in common stock sold last week, and the remaining ATM program capacity is close to 80% of the company's current market capitalization.
