Strategy's Bitcoin-Backed 'Digital Credit': What's the Upside?

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Key Points

• Strategy continues to deploy its recently announced “digital credit” plan, which manages the company’s STRC preferred stock and aims to improve its fundraising capabilities over time.
• The company continues to sell bitcoin and repurchase preferred stock, helping push the high-yielding shares closer to par, where Strategy may consider issuing more.
• By more actively managing its securities, Strategy aims to double its bitcoin per common share within seven years, with any increase in bitcoin’s price providing additional upside.

Strategy (MSTR) continues to sell bitcoins for cash, plowing the proceeds into shares of its own STRC Series A preferred stock, as part of the firm’s recently announced “digital credit” plan.

In the week ending August 9, Strategy made several key moves:

• Sold common stock worth $653.1 million, at an average price of about $99.17.

• Sold 1,690 bitcoins for $108.6 million, at an average price of $64,262.

• Repurchased 1,152,020 shares of STRC Series A preferred stock for a total price of $108.6 million, or about $94.27 per share.

Strategy’s moves effectively exchanged its 1,690 bitcoins for more than 1.15 million shares of the preferred stock. The cash proceeds from the common stock went to the company’s USD Reserve, now at $4.65 billion, which backstops the payment of dividends and other interest.