Summary
- Phong Le, CEO of Strategy, stated that the company plans to resume Bitcoin purchases once its Stretch (STRC) preferred shares return to their $100 par value, which will enable profitable stock issuance.
- Since late June, the firm has halted its Bitcoin acquisitions and raised $467 million in common stock to establish a $3 billion cash reserve, sufficient for two years of dividend payments.
- Le mentioned that if Bitcoin were to drop to $8,000 to $10,000, the company would need to assess the risks associated with its debt obligations.
Strategy, a firm focused on Bitcoin treasury management, intends to restart its Bitcoin purchases once its preferred shares recover, according to CEO Phong Le. This strategy is part of a revised financing model to navigate the ongoing downturn in the cryptocurrency market.
In an interview with Bloomberg TV, Le explained that the objective is to bring the firm's Stretch (STRC) preferred shares back to their $100 par value. He stated, "When Stretch gets back to par, we'll issue more. We'll buy Bitcoin. We may continue to beef up our U.S. dollar reserve," while expressing uncertainty about how long this recovery might take. He emphasized that issuing additional preferred stock is crucial to the capital strategy, as it enhances the Bitcoin value per share, benefiting shareholders.
Strategy has not made any Bitcoin purchases since late June. During this time, the company has focused on building its cash reserves, raising $467 million through a common stock offering to boost its cash reserve to $3 billion, which can cover dividends for two years. Le characterized this move as part of a significant transition, stating that the firm is evolving "from being a Bitcoin treasury company to a full digital capital platform."
Restoring Stretch to Par Value
Since mid-May, STRC shares have been trading below their $100 par value, with recent transactions around $89 as of Wednesday. Selling new preferred shares to raise capital becomes less appealing when the price is below par, which is why restoring this value is critical for Strategy's future plans. Le highlighted that increasing the U.S. dollar reserve is a key factor, stating, "We've learned over the course of the last couple months that having that liquid access to U.S. dollar capital, whether it be one, two, three years, is quite important." He also noted that as the reserve has grown recently, the shares have increased from a low of around $75 to nearly $90.
Commitment to the Market
Le reassured stakeholders that Strategy is not retreating from its position as a leading Bitcoin buyer. "We're not going anywhere," he asserted. "Anyone worried about Strategy shouldn't be," highlighting that the firm remains the largest identified holder of Bitcoin, with over 840,000 BTC—approximately 4% of the total supply—held in reserve. He remarked, "Bitcoin's a lot bigger than us," pointing out that the asset trades between $30 billion and $40 billion daily, and the company's recent $216 million in sales "did not move the market."
The sales began when co-founder Michael Saylor started to reduce the firm's substantial $54 billion Bitcoin holdings last month, sparking concerns about the sustainability of the debt-and-equity model established in 2020. However, analysts at Standard Chartered have downplayed these concerns, characterizing the sales as "mostly noise," following Strategy's introduction of a capital framework two weeks ago that provides management with greater flexibility to sell Bitcoin, repurchase securities, and maintain liquidity.
Le also dismissed a report from Bloomberg regarding distressed funds allegedly negotiating to exchange their STRC holdings, clarifying that the firm has not engaged in "any material conversations" on this front.
Considering Worst-Case Scenarios
For the time being, Strategy's Bitcoin purchases remain on hold. The firm’s MSTR stock has fallen over 77% in the past year, while Bitcoin has dropped 45% in the same period, currently trading at about half of its all-time high from October. This situation leaves the preferred-share mechanism that funds Strategy's purchases below the necessary level for Le to reactivate it.
On prediction market Myriad, which is owned by Decrypt’s parent company Dastan, users estimate just a 13% chance that Strategy will hold over 1 million BTC before 2027, with less than half a year remaining and the firm needing to acquire over 150,000 BTC to reach that goal.