This article first appeared on GuruFocus.
Strategy (NASDAQ:MSTR) rose 5.27% in premarket despite the Bitcoin treasury company announcing a Digital Credit Capital Framework that allows it to sell Bitcoin. The board has approved a BTC Monetization Program allowing the company to sell Bitcoin to generate up to $1.25 billion for its USD Reserve, fund preferred dividends and interest expense, or repurchase securities. Strategy’s USD Reserve stands at approximately $2.55 billion, representing about 17.4 months of coverage against annual preferred dividend and interest expense of roughly $1.76 billion. Combined with the $1.25 billion BTC monetization capacity,Strategy would have approximately $3.80 billion in liquidity.
The framework also includes a $1 billion repurchase program for Digital Credit Securities, covering STRC, STRF, STRK, and STRD, and a separate $1 billion MSTR common stock repurchase program. Strategy raised its STRC dividend rate to 12.00% annually, effective July 1, and said it will review the rate monthly going forward.
Strategy shares are down 47% year to date and over 75% in the last twelve months. With Bitcoin currently trading at $60,194, below Strategy’s average purchase price of $75,651, any sales under the program could be executed at a loss.
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