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Strategy adopted a new "Digital Credit Capital Framework" Monday that formally authorizes the company to sell up to $1.25 billion of Bitcoin to fund its preferred stock dividends and interest payments.
What's the Scoop?
- The USD Reserve: Strategy's cash reserve sits at about $2.55 billion as of June 28, earmarked solely for paying preferred dividends and debt interest. Against roughly $1.76 billion in annual dividend and interest obligations, that's about 17.4 months of coverage. Adding the potential $1.25 billion BTC sales grows their coverage to about $3.80 billion, or roughly 25.9 months. Additionally, a policy floor of maintaining at least 12 months of coverage was established.
- The STRC Dividend Hike: Strategy is raising the dividend rate on its variable-rate STRC preferred stock to 12.00% effective July 1, hoping to make it more attractive. Going forward, the company will evaluate the rate monthly based on trading levels, market yields, BTC price and volatility, and reserve coverage.
- Two Buyback Programs: Strategy established a $1.0 billion repurchase program for its preferred securities (prioritizing STRC) and a separate $1.0 billion program for MSTR common stock. Buying back preferred shares at a discount to stated value could reduce future dividend obligations. Neither buyback will be funded from the USD Reserve, though both could be funded through BTC sales.
- Market Reaction: All of Strategy's publicly traded assets (MSTR, STRC, and more) are up roughly 12% on the day, though STRC still has a ~17% gap to close before trading back on par.
Is Strategy’s 
Bitcoin Machine Breaking Down? on Bankless
Bitcoin Machine Breaking Down? on BanklessStrategy’s structure runs on Bitcoin, MSTR common stock, and STRC preferred, and right now all three are weakening at once.
David Christopher
