Strategy is adopting a new capital framework that allows it to monetize part of its Bitcoin holdings to fund dividends, build cash reserves and repurchase securities while maintaining its long-term Bitcoin strategy.
In a Monday 8-K filing with the US Securities and Exchange Commission, Strategy introduced its “Digital Credit Capital Framework,” which includes a Bitcoin monetization program and changes to its STRC preferred stock dividend policy.
The company has raised the STRC annual dividend rate to 12% from 11.5% and authorized separate buyback programs for preferred securities and its Class A MSTR common stock. Strategy said it may sell Bitcoin (BTC) to raise as much as $1.25 billion to increase its cash reserve, pay dividends and debt costs, as well as fund stock buybacks.
The filing comes amid a volatile stretch that has seen the value of MSTR shares slide almost 50% year-to-date while the price of STRC on Friday dropped as low as $71.25, a 28.75% discount to par, according to TradingView data. Grayscale’s research head Zach Pandl last week said Strategy should sell $3 billion in Bitcoin to cover its cash obligations.
Ahead of Monday’s Nasdaq open, investors had bid up MSTR share price more than 5.5%.
Strategy boosts cash reserve to $2.55 billion
A key part of the new framework is the company’s cash reserve, which it said has grown to $2.55 billion, or enough to cover about 17 months of preferred stock dividends and interest payments.
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.
Source: Michael Saylor
Strategy executive chairman Michael Saylor 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.
Related: Grayscale’s Pandl says Strategy should sell $3B Bitcoin to restore confidence
“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 biggest public Bitcoin treasury company also reported that it did not acquire any BTC 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. At last look, traders were paying about $60,018 to buy the token.
The company has added a net 3,625 BTC so far in June after buying 3,657 BTC and selling 32 BTC earlier in the month.
Source: SEC
At the same time, the company disclosed raising around $1.15 billion in net proceeds by selling 12.67 million MSTR shares.
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