Strategy Inc (NASDAQ:MSTR) saw its shares climb to $99.17 in premarket trading on Thursday, a 6.2% gain from the previous close of $93.39. The move came as the bitcoin treasury company announced a new authorization to sell up to $1.25 billion worth of its massive cryptocurrency holdings, alongside a plan to repurchase both common and preferred shares.
Despite the positive stock movement, the company's bitcoin reserves remain the dominant factor in its valuation. According to Reuters calculations, the raw value of Strategy's 847,363 bitcoin holdings, based on a bitcoin price of $61,483, stands at approximately $52.1 billion. However, the equity value implied by the premarket stock price is only $32.8 billion, leaving a gap of $19.3 billion. This gap, often referred to as the 'net asset value' discount, highlights the market's cautious view of the company's structure, which includes debt and preferred claims that take priority over common equity.
The board's new framework, established on June 29, sets a $2.55 billion reserve to cover about $1.76 billion in annual preferred dividends and interest, providing coverage for 17.4 months. The addition of the $1.25 billion bitcoin sale authorization brings total coverage to $3.80 billion, or 25.9 months. The plan also allows for up to $1 billion in common stock buybacks and up to $1 billion in preferred stock repurchases.
Founder and Executive Chairman Michael Saylor reiterated that bitcoin remains the company's 'primary treasury reserve asset,' while CEO Phong Le indicated a strategic shift away from 'one-way capital issuance.' CFO Andrew Kang succinctly stated, 'Bitcoin is capital.'
Benchmark analyst Mark Palmer commented that Strategy is now 'an active manager of both sides' of its capital structure. He maintained a Buy rating and a $570 price target, describing the sale authorization as a 'rounding error' compared to the company's vast bitcoin holdings.
The preferred share buyback program appears to offer higher cash-cost leverage than common stock repurchases. The latest quotes for Strategy's preferred shares show significant discounts to their $100 stated amounts: STRC at $87.46 (12.5% discount), STRF at $94.77 (5.2% discount), STRK at $60.68 (39.3% discount), and STRD at $60.27 (39.7% discount). A $1 billion buyback of common stock at $99.17 would retire about 10.1 million shares, or 3.0% of outstanding shares, but would not reduce the $1.76 billion annual preferred dividend and interest burden.
Bitcoin's price remains the key swing factor. On July 1, Citi lowered its 12-month bitcoin target to $82,000 from $112,000 and reduced its net ETF inflow estimate to zero from $10 billion, citing potential selling by digital asset treasury firms as a risk. Strategy noted it will consider additional common stock deals based on market conditions but will be selective if shares trade near 1x modified net asset value per share.
