Strategy’s dual approach – Why is the firm selling MSTR while buying back STRC?

Strategy has taken two different routes for its shares as it sold its common stock MSTR while repurchasing its preferred stock STRC.

According to a 27th July press release, Strategy paid an average of $86.52 per share, or roughly $25 million, to buy back 288,930 STRC shares. This occurred even though STRC was trading below the $100 price level. 

The press release added, 

Strategy’s current policy is not to issue STRC below $100 per share.

To support this, the company plans to maintain the 12% annual dividend until the stock trades consistently close to its target price, and it will not issue new STRC shares below $100.

That said, after this recent buyback, Strategy still has $975 million in its repurchase program. In fact, the firm plans to continue buying STRC whenever the stock falls below $100 and the discount is greater and to progressively cut back on buybacks as the share price approaches $100.

Other developments

Along with this, Strategy also raised its USD reserve by $525 million to a record $3.75 billion, which is sufficient to cover roughly 25 months’ worth of anticipated preferred-stock dividend payments. 

However, this reserve cannot be used to buy back STRC. Rather, it exists only to guarantee that the business can pay its debt and dividends. 

In fact, as of the 26th of July, Strategy had about $3.75 billion in U.S. dollars in reserve, which it stated was meant to cover interest payments on outstanding debt and dividend payments on its preferred stock.

Additionally, in the week ending on Sunday, the 26th of July, Strategy sold 3.98 million shares of its MSTR through its at-the-market (ATM) equity offering program, generating $544.5 million in net proceeds.

But despite the new funding, the business didn’t buy any Bitcoin [BTC] during that time, marking the fifth week in a row that it hasn’t. 

Strategy’s Bitcoin holdings stayed the same at 843,775 BTC, which was purchased for an average of $75,531 per Bitcoin, including fees and expenses, at a total cost of about $63.73 billion.

Market dynamics

This occurs as STRC was trading at $88.32 at the time of writing, following a 1.65% gain on the previous trading day. At the same time, MSTR had increased by 7.61% to trade at $98.65 at press time. 

In contrast, the price of Bitcoin was trading at $63,385.23 at the time of reporting following a 3.08% decline over the previous day.

However, AMBCrypto’s recent analysis suggested that Strategy’s recent $225 million cash reserve addition is increasing uncertainty surrounding MSTR and STRC immensely. 

Final Summary

• After the recent STRC shares buyback, Strategy still has $975 million in its repurchase program.
• With no fresh Bitcoin purchases, Strategy’s Bitcoin holdings stand at 843,775 BTC.