Strategy Spends $267 Million on Bitcoin, Issues STRC for Third Straight Week

In brief

• Strategy spent $267 million on Bitcoin last week.
• That marked a deceleration from the previous weeks’ purchases of $1.2 billion and $2.1 billion, respectively.
• The company issued more of its variable rate preferred stock, STRC.

Strategy continued buying Bitcoin as the digital asset’s price fell to its lowest level in five weeks, but the company’s latest acquisition marked a deceleration from the previous two additions. The Tysons Corner, Virginia-based firm spent $267 million on Bitcoin last week, while adding roughly 2,900 Bitcoin to its stockpile, according to a press release. In the two weeks prior, the firm spent around $1.2 billion and $2.1 billion on the digital asset, respectively. The largest corporate holder of Bitcoin now owns 712,600 BTC, a sum worth $62.7 billion, with the asset recently changing hands around $87,600, according to CoinGecko. Bitcoin slipped below $90,000 on Friday, as signs of a financial crisis began to emerge in Japan, compounding uncertainties tied to the prospect of a government shutdown in the U.S. 

Strategy shares recently changed hands around $161, according to Yahoo Finance. Although the company’s stock price has slid more than 60% over the past six months, shares have grown relatively stable while advancing 1.5% over the past 30 days.
Strategy’s latest purchase was funded primarily through the issuance of common stock, accounting for 97% of the $264 million that it raised. Meanwhile, the company issued more of its variable rate, or STRC, preferred stock, which entails monthly dividend payments. STRC currently pays cash at an annualized rate of 11%, and Strategy co-founder and Executive Chairman Michael Saylor has billed it as an alternative to a savings account for investors. This month, Strategy has raised $421 million by offering STRC to investors. When STRC trades above $100, Strategy has signaled that it will issue more of the preferred stock to keep its price within that range—while using the proceeds to buy Bitcoin. On Monday, STRC was valued $99.50, after climbing above the threshold in previous weeks.

Strategy’s embrace of preferred shares as an additional source of funding last year inspired the creation of its so-called USD Reserve, with investors growing concerned that Strategy could eventually be forced to sell its Bitcoin to meet associated obligations. According to its website, Strategy’s cash reserves can cover 30 months of dividend payments. The stockpile’s creation also coincided with a decline in the company’s so-called mNAV, a metric key to determining how effective issuing common stock would be toward Strategy’s goals. The company measures success by looking at how much the amount of Bitcoin that it owns per share has increased over a given period of time, or BTC Yield. When mNAV, or multiple-to-net asset value, is above a value of 1, issuing common stock to buy Bitcoin has a positive effect. Strategy’s mNAV stood at 1.08 on Monday. Following its $2.1 billion Bitcoin purchase last week, the company showed that it can still accumulate Bitcoin in size despite being valued at a razor-thin premium to its holdings, according to TD Cowen Analyst Lance Vitanza. “While the purchases were funded primarily from equity issued close to parity, the week’s activity created meaningful BTC yield,” he wrote, predicting that the Bitcoin-buying firm will continue to ramp up purchases in relation to the asset’s slide. “We expect more of the same,” he added. “So long as the price of Bitcoin remains depressed, Strategy will be more aggressive in issuing common and preferred equity securities at a given price, relative to last summer when Bitcoin was making new highs.” On Myriad, a prediction market owned by Decrypt parent company Dastan, traders penciled in an 86% chance on Monday that Strategy’s mNAV, as calculated by Bitcoin Treasuries, will hit 0.85 before touching 1.5. That marked a slight decline from 88% earlier this month.