Strategy stock rises as firm may sell Bitcoin to fund buybacks

Shares of Strategy (formerly MicroStrategy) rose after the company outlined a new capital framework that allows management to sell Bitcoin to fund preferred dividends, interest and repurchases and authorized up to $2 billion in buybacks. The stock gained about 3.9% to $85.52 in early trading, while the distressed Variable Rate Series A Perpetual Stretch Preferred Stock (STRC) traded near $81.

The company introduced a Digital Credit Capital Framework that formalizes a Bitcoin monetization program. The program permits sales of Bitcoin when management judges selling preferable to issuing new securities and can generate up to $1.25 billion for a U.S. dollar reserve or to finance preferred dividends, interest and repurchases. Any sales would depend on market conditions, tax, accounting and legal considerations and are not mandatory.

Strategy reported holding 847,363 Bitcoin as of June 28, with a fair value near $50.7 billion and an aggregate unrealized loss exceeding $13 billion versus acquisition cost. The company’s U.S. dollar reserve was about $2.55 billion on the same date, a figure that included expected proceeds from at-the-market equity sales that had not yet settled. Strategy estimates current annual preferred dividend and interest obligations at roughly $1.76 billion; the cash reserve covers about 17.4 months of those obligations.

The board adopted a policy requiring a minimum reserve equal to at least 12 months of expected preferred dividends and interest unless the board approves otherwise. Combined with the $1.25 billion of authorized Bitcoin monetization capacity, the company said it has about $3.8 billion of liquidity coverage for preferred dividends and interest expense, equal to roughly 25.9 months of coverage before taxes, transaction costs, repurchases or changes in dividend rates.

The company raised the annual dividend rate on STRC to 12% from 11.5%, effective for semi-monthly periods with record dates on or after July 1. Strategy will review the STRC dividend rate monthly using factors including the security’s trading level, market yields, credit spreads, Bitcoin price and volatility, reserve coverage and broader capital market conditions. Dividends remain subject to board approval.

Management authorized up to $1 billion in repurchases of its Digital Credit Securities, including STRC and related instruments, and a separate $1 billion repurchase program for Class A common stock. Strategy said neither preferred nor common stock repurchases will be funded from the U.S. dollar reserve; if repurchases are funded by selling Bitcoin, those sales would occur under the Bitcoin monetization program. Repurchases may occur through open-market purchases, block trades, tender offers, exchange offers or privately negotiated transactions.

CEO Phong Le noted the company intends to alternate between issuing securities when capital markets are favorable and repurchasing securities when market prices make buybacks accretive. Executive Chairman Michael Saylor reiterated that Bitcoin remains Strategy’s primary treasury reserve asset while adding that the Digital Credit approach requires liquidity and active capital management.

Quinn Thompson, chief investment officer at Lekker Capital, called the decision to direct recent equity offering proceeds into a defensive cash reserve positive for institutional confidence but expressed skepticism that a 50-basis-point increase in STRC’s coupon alone will return the preferred to its $100 stated amount.