Strategy's increased dollar buffer covers more than 2 years of dividend obligations

AI Summary4 min read

TL;DR

Strategy increased its cash reserve to $2.2 billion, providing over 2.5 years of dividend coverage and flexibility to handle potential bitcoin market downturns. The reserve also allows the company to address a $1 billion convertible note due in 2027 if needed.

Key Takeaways

•Strategy boosted its dollar reserve to $2.2 billion, creating a 32-month buffer for preferred dividend payments totaling about $824 million annually.
•The cash cushion provides flexibility to navigate a potential 'bitcoin winter' if BTC prices follow the four-year market cycle, extending coverage through the next halving expected in April 2028.
•The reserve gives Strategy the option to cover a $1 billion convertible note put in September 2027 if share prices remain below the $183 conversion threshold, while still leaving 15 months of dividend coverage.
•The company holds 671,268 BTC as additional flexibility, with only a small portion needed if cash settlement were required for the convertible notes.
•Strategy sold stock to add $748 million to the reserve, easing near-term liquidity pressure and supporting operations during periods of volatility.

Strategy Executive Chairman Michael Saylor (Danny Nelson, modified by CoinDesk)

What to know:

Strategy boosted its reserve to $2.2 billion, providing more than two and a half years of runway to pay dividends and navigate a potential bitcoin winter if prices follow the four year cycle.
The enlarged cash position also gives the company the option of covering the September 2027 $1 billion convertible note put if needed, while leaving additional dividend headroom.

Strategy boosted its reserve to $2.2 billion, providing more than two and a half years of runway to pay dividends and navigate a potential bitcoin winter if prices follow the four year cycle.
The enlarged cash position also gives the company the option of covering the September 2027 $1 billion convertible note put if needed, while leaving additional dividend headroom.

Strategy (MSTR), the largest bitcoin BTC$87,639.60 holder among publicly traded companies, increased its dollar reserve to $2.2 billion, giving the company a two-and-a-half-year buffer to meet dividend obligations and the flexibility to navigate a potential "bitcoin winter" if BTC prices follow the conventional four-year market cycle.

The company sold stock to add $748 million to the reserve on Monday. This cash cushion eases near term liquidity pressure and supports operations through periods of heightened volatility.

The reserve is earmarked for preferred stock dividend payments totaling some $824 million a year, according to the company dashboard, across the STRK, STRC, STRF, STRD and STRE series. The runway extends into the next bitcoin BTC$87,639.60 halving, an event that cuts block rewards by 50% roughly every four years and is likely to next occur in April 2028.

The roughly 32 months of cover supports uninterrupted payments through 2026, 2027 and into 2028.

The first convertible note put date, when bondholders may force Strategy to repurchase their bonds arrives in September 2027, with a $1 billion principal. Based on MSTR’s history of settling prior notes via share conversion, this would be the preferred option.

If the share price remains below the $183-per-share conversion threshold, Strategy would have sufficient cash. It currently trades near $165, around 12% below that level.

At or above the conversion price, the notes would convert into equity, while prices below would require cash repayment. In addition, MSTR holds 671,268 BTC, offering further flexibility, as only a small portion of holdings would be needed if cash settlement were required.

Jeff Walton, the chief risk officer at Strive, underscored the importance of what he calls the company’s USD battery, noting that the current reserve is enough to fully address the September 2027 convertible put while still leaving an additional 15 months of preferred dividend coverage.

MSTR shares are down roughly 45% year to date, trading near $163 per share.

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