Strategy Adopts New Capital Framework, Opens Door to Selling Up to $1.25 Billion in Bitcoin

Strategy announced Monday that its board has adopted a Digital Credit Capital Framework, a five-part overhaul of how the company manages its preferred stock obligations that, for the first time since the company began accumulating bitcoin, formally authorizes the sale of bitcoin at meaningful scale. The framework arrives days after Strategy’s enterprise valuation fell below the net asset value of its bitcoin holdings for the first time, and amid mounting pressure on its STRC preferred stock, which has traded as low as $71, well below its $100 par value.

Under the new framework, Strategy announced a BTC Monetization Program, which authorizes the selling of up to $1.25 billion in bitcoin to fund the company’s USD Reserve, preferred dividends and interest payments when management judges it more advantageous than issuing common stock, and new stock and preferred buyback programs. The company stressed the program does not obligate it to sell any bitcoin and has no fixed expiration date.

This story is an excerpt from the Unchained Daily newsletter.

Strategy also announced a USD Reserve Policy, setting a minimum reserve floor of 12 months of coverage, with any reduction below that threshold requiring separate board authorization.

Strategy said its USD reserve stood at approximately $2.55 billion as of June 28, providing roughly 17.4 months of coverage against the company’s current annual expected preferred dividend payments and interest expense of about $1.76 billion. Combining the cash reserve with the new $1.25 billion bitcoin monetization capacity, Strategy says it has approximately 25.9 months of total liquidity coverage, before accounting for repurchases or future dividend changes.

Two new repurchase programs round out the framework. Strategy authorized up to $1.0 billion to repurchase its Digital Credit Securities, the umbrella term for its preferred stock classes (STRC, STRF, STRD, and STRK), with STRC expected to be the initial priority if management determines repurchases would be accretive. A separate $1.0 billion authorization covers buybacks of Class A common stock. Neither program will be funded from the USD Reserve; if funded through bitcoin sales, those sales would come under the new BTC Monetization Program.

Strategy also raised the STRC dividend rate to 12.00%, effective for dividend periods with record dates on or after July 1, up from the prior 11.5% rate. The company said its objective remains for STRC to trade in a range of $99 to $100, and that it will now evaluate the dividend rate monthly based on trading levels, market yields, credit spreads, bitcoin price and volatility, and the company’s broader capital structure. Strategy added that it “will not necessarily increase the STRC dividend rate solely because STRC trades below its stated amount,” a signal that future dividend hikes are not automatic.

Strategy CEO Phong Le described the company’s new framework as moving “from one-way capital issuance to active capital management,” while CFO Andrew Kang said the company now has the flexibility to use bitcoin holdings “to strengthen Digital Credit, fund or replenish the USD Reserve, fund dividend payments and interest expense, and fund accretive repurchases when BTC monetization is more advantageous than issuing common equity.”

Founder Michael Saylor maintained the company’s underlying commitment to bitcoin in the announcement: “Strategy remains committed to Bitcoin as its primary treasury reserve asset. At the same time, Digital Credit requires liquidity, discipline, and active capital management.”

The announcement follows a stress test on Strategy’s funding model that intensified through June, as STRC’s slide below par and MSTR’s discount to its bitcoin closed off both of the company’s traditional capital-raising channels at once.

Related Listen: How Digital Credit Assets like STRC and SATA Differ from Bitcoin or DAT Stocks