Saylor Gives Strategy a Bitcoin Sell-to-Eat-Billions Bailout Blueprint 🍽️

Strategy disclosed a new "Digital Credit Capital Framework" on Monday that authorizes the company to sell up to $1.25 billion of its Bitcoin holdings to fund cash reserves, cover preferred-stock dividends and interest payments, and repurchase securities when management deems it appropriate. The framework, outlined in a U.S. Securities and Exchange Commission 8-K filing, was accompanied by changes to the company's STRC preferred stock, including an increase in its annual dividend rate to 12% from 11.5%, and newly authorized buyback programs for preferred securities and its Class A MSTR common stock.

Executive Chairman Michael Saylor said the company "remains committed to Bitcoin as its primary treasury reserve asset" but added that "Digital Credit requires liquidity, discipline, and active capital management." He described the framework as intended to "strengthen credit quality" and enable Strategy to "reduce expected preferred stock dividend payments when accretive." Saylor also said the existing cash reserve, combined with the $1.25 billion Bitcoin monetization capacity, gives Strategy up to $3.8 billion in dividend coverage, or nearly 26 months.

Strategy said its USD Reserve has grown to $2.55 billion, a level sufficient to cover about 17 months of preferred stock dividends and interest. Under the new policy, the reserve can only be used for those payments and must be maintained at a minimum of 12 months unless the board approves otherwise. The company did not acquire any Bitcoin during the week ended Sunday, leaving its holdings unchanged at 847,363 BTC purchased for a combined $64.1 billion, at an average of $75,651 apiece. The firm reported raising around $1.15 billion in net proceeds by selling 12.67 million MSTR shares.

The announcement comes as Strategy's preferred stock has come under pressure. STRC traded as low as $71.25 on Friday, a 28.75% discount to par, according to TradingView data, and the value of MSTR shares has slid almost 50% year-to-date. Shortly after Monday's disclosure, Bitcoin changed hands around $59,800, down 0.5% over the past day per CoinGecko data, while MSTR advanced about 5% in pre-market trading to $86.52 according to Yahoo Finance. Saylor said Strategy "expects to remain disciplined in its use of MSTR issuance, particularly when the stock trades at or near 1x mNAV."

Strategy also disclosed that the board approved the repurchase of up to $1 billion of Digital Credit Securities, including STRC, STRF, STRD and STRK, with STRC identified as a likely first target if management decides a buyback would enhance the company's capital structure. The company noted that any repurchases funded through Bitcoin sales would be executed under the BTC Monetization Program, but added that Strategy is not obligated to sell Bitcoin under the scheme and may choose not to offload any of its holdings.