Strategy announced a new capital framework that envisages converting some of its Bitcoin assets into cash and using them for dividend payments, cash reserve creation and securities repurchases. The company announced this step with the 8K notification submitted to the US Securities and Exchange Commission, while emphasizing that its long-term Bitcoin strategy will be maintained.
Scope of the new framework
The so-called “Digital Credit Capital Framework” includes a Bitcoin cash-out program as well as changes to the dividend policy on STRC preferred shares. Strategy increased the annual dividend rate for STRC from 11.5% to 12%. It also approved separate repurchase programs for preferred securities and Class A MSTR shares.
The company said it could sell up to $1.25 billion in Bitcoin to grow its cash reserves, cover dividend and debt costs, and finance share buybacks. Under the leadership of Michael Saylor, Strategy is known for its large-scale Bitcoin purchases and is among the publicly traded companies that hold the most Bitcoin on its balance sheet.
Michael Saylor noted that when the current cash reserve and $1.25 billion Bitcoin cash conversion capacity are evaluated together, it provides the company with the power to cover dividends of approximately $3.8 billion, which corresponds to approximately 26 months.
Reserves and payment capacity
Strategy announced that its cash reserves reached 2.55 billion dollars. This amount is sufficient to cover approximately 17 months of preferred share dividends and interest payments. According to the new policy, this reserve can only be used for these payments and the level must be maintained for at least 12 months unless the board of directors decides differently.
Saylor said the company plans to be cautious about issuing new shares, especially when MSTR stock is trading at or near 1x mNAV.
Strategy aims to remain disciplined in its use of the MSTR issuance and act more selectively, particularly during periods when the stock is trading at or near 1x mNAV.
Stock performance and market reaction
This adjustment comes during a volatile period when MSTR shares have lost nearly 50% of their value since the beginning of the year. According to TradingView data, STRC price dropped to $71.25 on Friday and was traded at a 28.75% discount to its nominal value. Zach Pandl, head of Grayscale research unit, argued last week that Strategy needed to sell $3 billion worth of Bitcoin to meet its cash obligations.
Before the market opening, investors turned to MSTR shares again. The share price rose more than 5.5% in pre-Monday trading on Nasdaq.
Bitcoin presence remained stable
Strategy also announced that it did not purchase any new Bitcoin in the week ending Sunday. Thus, the company’s assets remained at 847,363 BTC. This amount was created with a total purchase of $64.1 billion and an average cost of $75,651. In the latest pricing, Bitcoin changed hands for approximately $60,018.
The company has added a net 3,625 BTC so far in June. While 3,657 BTC was purchased at the beginning of the month, 32 BTC was sold. In addition, Strategy sold 12.67 million MSTR shares, generating net proceeds of approximately $1.15 billion.
