Strategy shares ended the day down over 8%, closing at $84.68, despite the company announcing its new Digital Credit Capital Framework. Benchmark Equity Research maintained its “buy” recommendation on the stock and reiterated its $570 target price.
Shares remained under pressure while analysts’ targets were maintained
Benchmark’s $570 target indicates approximately 515% upside potential from Monday’s closing price. The agency states that the new framework provides management with more tools to buy back securities, manage preferred share liabilities, and generate cash from Bitcoin assets during periods of increased market stress.
However, the weakness in the stock continued. The sharp withdrawal in the last week has brought concerns about the company’s capital structure to the fore again. The company’s variable-rate preferred security, STRC, which was targeted to trade around $100, also recently fell below $80.
Benchmark analyst Mark Palmer states that Strategy can now manage both sides of the capital structure more actively, which is seen as an important positive development for shareholders.
The new framework includes a reserve of $2.55 billion, equivalent to 17.4 months of dividend covering capacity. The plan also includes a $1 billion common share repurchase program and $1 billion preferred share repurchase authority covering STRC, STRF, STRD and STRK.
Mini dictionary: Preferred shares refer to securities that have priority in terms of dividends and liquidation over ordinary shares. Net asset value premium refers to the fact that a company’s shares are traded at a higher price compared to the total value of its assets.
| Organisation | Recommendation | target price | previous destination |
|---|---|---|---|
| benchmark | get | $570 | unchanged |
| TD Cowen | get | $260 | $400 |
| Canaccord Genuity | get | $130 | $163 |
Authorization given for Bitcoin sales
Strategy’s board of directors also approved the sale of Bitcoin worth at most $1.25 billion out of 847,363 BTC in the company treasury. Benchmark assesses that this mandate is limited compared to total Bitcoin assets and concerns of aggressive selling may be overstated.
With the new plan, the company also gained the flexibility to stop the issuance of common shares during periods when the shares are not traded above their net asset value. Management will also be able to repurchase shares or preferred securities in cases it deems value-enhancing.
Other institutions lowered targets
TD Cowen maintained its “buy” recommendation on Strategy and lowered its target price from $400 to $260. The institution notes that this revision is not directly due to the new capital framework, but to the expectation of lower Bitcoin prices.
Canaccord Genuity also lowered its 12-month target from $163 to $130 and maintained its “buy” recommendation. The institution emphasized that the volatility in Bitcoin, risks in the capital structure and investors’ concerns about the financing model created pressure.
In its evaluation, Canaccord states that Strategy’s Bitcoin accumulation model works more efficiently in the forward direction, and when it reverses, the performance weakens.
Bitcoin and market cap increased pressure
Strategy deployed this framework after MSTR stock had fallen nearly 30% in the previous week. The company’s market value at one point fell below the total value of its Bitcoin holdings, putting additional pressure on investor sentiment.
The privileged share structure is also closely monitored in the market. Located above common shares in the capital structure, STRC is designed to offer lower volatility than MSTR. However, how the dividend obligations on these securities will be financed has reinforced dilution concerns.
Strategy’s performance remains tightly tied to the Bitcoin price. While Bitcoin last traded around $58,487, it fell nearly 20% in June. MSTR, on the other hand, is preparing to close the month with a loss of approximately 41%. If this happens, the stock will have seen its worst monthly performance since 2022. With the ongoing decline after the $540 peak reached in November 2024, Bitcoin has lost approximately 50% of its value and MSTR has lost approximately 77% since STRC began trading.
