Strategy's latest statement comes amid heightened volatility in its preferred stock price. The company disclosed that Executive Chairman Michael Saylor is publicly defending its Bitcoin treasury strategy, stating that the company's combined Bitcoin and dollar reserves exceed its debt by approximately $48 billion.
Compared to the stressful period of 2022
The company disclosed that Strategy currently holds approximately 846,842 BTC, remaining the largest publicly traded company in terms of cryptocurrency holdings. According to a recent filing with the U.S. Securities and Exchange Commission, its average cost per Bitcoin was approximately $75,656, while the reported spot price range for Bitcoin is approximately $62,500 to $63,700.
Saylor compared the current situation to the end of 2022. At that time, Bitcoin was fluctuating around $20,000, and Strategy held approximately 130,000 BTC, worth about $2.6 billion. Subsequently, when Bitcoin fell below $16,000, the company's debt exceeded its total Bitcoin and cash reserves by about $300 million.
STRC falls below $100
Another point of contention in the market is the performance of Strategy's preferred stock, STRC. This product, officially known as Floating Rate Series A Perpetual Preferred Stock, is designed to trade around $100 and pay cash dividends to its holders.
However, STRC has recently fallen into the $80 range. The company has previously raised STRC's dividend yield multiple times, bringing the annualized level close to 11.5%, and has been adjusting the interest rate monthly to push the price back to near par value. If it remains below $100 for an extended period, this financing channel will become less helpful for continuing to buy Bitcoin and arranging dividends.
It's important to note that STRC is not directly backed by Bitcoin held by Strategy. It has priority in repayment against the company's remaining assets, making it more like a credit instrument than a product directly pegged to the price of Bitcoin.
Annual dividends of approximately $1.5 billion
Discussions surrounding Strategy have also focused on cash flow affordability. Grayscale's research director stated on a podcast that it's more of a cash flow issue than a problem with the crypto asset itself. This is because Bitcoin itself doesn't generate returns, and preferred stock dividends rely on cash, refinancing, issuing new shares, or selling assets to pay them.
The report mentions that Strategy's various preferred stock instruments, including STRC and STRK, have a combined annual dividend obligation of approximately $1.5 billion. In comparison, the company's software business is projected to generate approximately $477 million in revenue in 2025, with cash reserves of approximately $1 billion, insufficient to cover a full year's preferred stock dividend payouts.
In addition, Strategy recently sold 32 BTC at an average price of approximately $77,135 per BTC to support preferred stock dividends. This move has attracted attention because the company has a long history of consistently accumulating Bitcoin. However, Saylor emphasized that the company as a whole remains a clear net buyer.
Additional information:In a conversation at BTC Prague, Saylor stated that the hardest thing for a company is not predicting the future, but surviving long enough to turn those predictions into reality. This is also the long-term perspective he repeatedly emphasized when defending Strategy's current capital structure.
