Strategy Signals Bitcoin Sales May Fund $975M STRC Buyback Program

Michael Saylor says Strategy may sell bitcoin to fund STRC buybacks below $100. See how the $975M repurchase plan works and what it means for MSTR.

On July 27, Michael Saylor, Executive Chairman of Strategy Inc. (Nasdaq: MSTR), announced that the company would consider selling bitcoin or MSTR stock to fund future buybacks of its STRC preferred stock, depending on the prevailing market price. STRC is Strategy’s Variable Rate Series A Perpetual Stretch Preferred Stock with a stated value of $100 per share and a dividend rate that management reviews monthly.

Saylor noted that if STRC were trading below the $100 par value, the sale of bitcoin might be the preferred source of funding. “When STRC trades at a substantial discount to $100, it makes sense for us to sell bitcoin to facilitate buybacks at a lower cost,” he wrote. The goal is to keep the STRC price close to the $100 par value and avoid having to intervene to maintain liquidity, minimize volatility, or increase demand. “Under our Digital Credit Capital Plan we do not plan to issue any additional STRC shares below the $100 par value,” he wrote. The STRC shares pay a 12% annual dividend rate. Management reviews the rate each month.

In recent days, Strategy has been utilizing sales of bitcoin and MSTR shares to finance its buybacks.

Buybacks Driven by the Discount

Over the last week (ending July 26), Strategy repurchased 288,930 STRC shares for approximately $25 million, or an average of $86.52 per share. That’s a $13.48 discount from the $100 stated value, exclusive of any additional benefit derived from early retirement of the shares.

“We are a consistent and disciplined buyer,” said Saylor. “We purchase more shares when the STRC discount is wide, and we purchase fewer shares as the STRC price approaches $100.” Strategy had $975 million available for preferred stock buybacks on July 26, providing ample room for additional repurchases. “As always, we will adjust the pace of our purchases based on price and liquidity. When discounts are wide, we’ll increase buybacks,” he said. “We’ll let the STRC market breathe when discounts narrow.”

USD Reserve Remains Untouchable

Separately, Strategy increased its USD Reserve by $525 million as a result of selling MSTR common stock. Its USD Reserve now totals a record $3.75 billion, which is sufficient to cover about 25 months of expected preferred dividend payments and must be reserved solely for dividend and debt payments as mandated by board policy.

Because the USD Reserve cannot be used for anything but dividend and debt payments, the preferred stock buybacks must rely on other funding sources. Thus, Strategy may have to issue additional MSTR shares, or sell bitcoin if management deems it prudent, to fund its buybacks. Such an arrangement allows the company to repurchase preferred shares at a discount while avoiding a reduction in funds set aside for dividend and debt payments.