Strategy introduces new capital structure to maintain Bitcoin holdings while funding shareholder returns
Strategy, led by Michael Saylor, has announced a comprehensive capital framework that enables Bitcoin asset monetization for dividend payments, establishing a $2.55 billion reserve fund and share repurchases, with STRC dividends increased to 12%.
A fresh capital framework is being implemented by Strategy that permits the company to liquidate portions of its Bitcoin portfolio to support dividend distributions, establish cash buffers and execute security repurchases while preserving its strategic Bitcoin accumulation approach over the long haul.
Through an 8-K filing submitted Monday to the US Securities and Exchange Commission, Strategy presented its "Digital Credit Capital Framework," incorporating a Bitcoin liquidation program alongside modifications to the dividend policy for its STRC preferred stock.
The firm has increased the STRC annual dividend rate from 11.5% to 12% and greenlit distinct buyback programs targeting both preferred securities and its Class A MSTR common stock. According to Strategy, the company may liquidate Bitcoin (BTC) holdings to generate up to $1.25 billion for the purpose of expanding its cash reserve, distributing dividends and servicing debt expenses, in addition to financing stock repurchase operations.
This regulatory filing arrives during a turbulent period characterized by MSTR shares declining nearly 50% on a year-to-date basis, while STRC's price plummeted to a low of $71.25 on Friday, representing a 28.75% discount relative to par value, based on data from TradingView. Grayscale's head of research, Zach Pandl, suggested last week that Strategy ought to divest $3 billion worth of Bitcoin to satisfy its cash requirements.
Prior to Monday's Nasdaq trading session opening, market participants had pushed MSTR's share price upward by more than 5.5%.
Strategy increases cash reserve to $2.55 billion
A fundamental component of this newly introduced framework involves the company's cash reserve, which the firm reports has expanded to $2.55 billion, representing sufficient funds to satisfy approximately 17 months of preferred stock dividend distributions and interest obligations.
According to the updated policy, this reserve may exclusively be utilized for such payments and needs to be kept at no less than 12 months of coverage unless alternative authorization is granted by the board.
Michael Saylor, Strategy's executive chairman, stated that the current cash reserve, when combined with the $1.25 billion capacity for Bitcoin monetization, provides Strategy with as much as $3.8 billion in dividend coverage, equating to nearly 26 months of payments.
"Strategy expects to remain disciplined in its use of MSTR issuance, particularly when the stock trades at or near 1x mNAV," Saylor added.
No Bitcoin purchases as Strategy raises $1.15 billion
The world's largest public Bitcoin treasury holder also disclosed that no BTC was acquired throughout the week that concluded Sunday, keeping its total holdings steady at 847,363 BTC, which were acquired for an aggregate cost of $64.1 billion, representing an average purchase price of $75,651 per coin. At the most recent check, market participants were paying approximately $60,018 to purchase the token.
Throughout June thus far, the company has accumulated a net total of 3,625 BTC following the acquisition of 3,657 BTC and the sale of 32 BTC earlier during the month.
Simultaneously, the company revealed it had secured approximately $1.15 billion in net proceeds through the sale of 12.67 million MSTR shares.