Invest3 publishers2 min readPublished
Strategy put more money into buying back STRC preferred than into bitcoin last week
Strategy spent $151.7 million retiring STRC preferred in the week to September 27, more than the $142.7 million it paid for 1,665 bitcoin. MSTR stock sales paid for most of both, so common shareholders are now paying to shrink the company's preferred stock.
The Investor · Invest desk
What happened
- Strategy raised $246.2 million net by selling 1.47 million MSTR shares through its at-the-market program, and $103.5 million of that went to the STRC buyback.
- The remaining $48.1 million of the buyback came from the USD Cash pot, which fell to $1 billion from $1.05 billion over the week.
- Holdings reached a record 847,666 BTC, acquired for a total of $63.95 billion at an average cost of $75,437 a coin.
- The week before, Strategy had bought 950 BTC for $75.7 million, ending a two-week pause in purchases.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- cost About 42 cents of every net dollar raised from MSTR sales last week went to retiring STRC, so part of the week's dilution of common holders bought no bitcoin at all.
- constraint At last week's $151.7 million pace, the $723.5 million left in the repurchase program lasts under five weeks, so continued support for STRC needs a new authorization or smaller weekly buys.
- precedent A second straight week of pairing bitcoin buys with STRC repurchases, after more than 1.77 million shares the week before, makes preferred buybacks a recurring use of ATM money that competes with bitcoin for each dollar raised.
Dividing $151.7 million by 1.53 million shares puts Strategy's average STRC repurchase price at about $99.15 [2]. The company says it is buying because the preferred trades below its stated amount [10]. The common went the other way: the 1.47 million MSTR shares sold in the same week fetched roughly $167.50 each, net [3]. Each STRC share retired is one fewer dividend for the $5.02 billion USD Reserve to cover, and the reserve paid out $22.1 million of preferred dividends last week [7].
Strategy sold no STRF, STRC, STRK or STRD through its ATM programs during the week, while keeping $17.51 billion of STRC capacity available on them [8]. Strategy can issue or retire the same security depending on where it trades against its stated amount [8][10].
The move away from pure accumulation began before this week. Strategy sold 6,948 BTC between May and August while it built dollar reserves [11]. Last month it created a separate USD Cash pot that can fund bitcoin buys, reserve top-ups and other capital management [15]. It also proposed daily dividend accrual on its preferred stock last week, to dampen volatility [13].
If STRC climbs back to its stated amount, the buybacks stop, issuance from that STRC capacity resumes, and last week was price support for a funding tool. A second version has the repurchase authorization running dry without renewal, a short campaign that changes little. The third turns on Strategy's capital framework, which lets it sell up to $1.25 billion of bitcoin to fund the reserve, dividends, interest and repurchases of MSTR or preferred [12]. In that version, Strategy sells bitcoin to pay for STRC buybacks.
On last week's evidence, I think Strategy is managing its capital structure as much as it is buying bitcoin: it spent $9 million more retiring preferred than buying coins [7]. The counter-case is in the same filing. Strategy bought bitcoin for a second straight week [17], its holdings now sit 303 coins above the June 22 record tracked by BitcoinTreasuries [6], and it paid $85,681 a coin, about 13.6% above the average cost of everything it owns [8]. That view is wrong if Strategy resumes selling STRC through its ATM within weeks at or near the stated amount. Then the buyback was a trade around the stated amount, and bitcoin still gets most of the common-stock money.
What to watch
- The shareholder vote on daily dividend accrual for Strategy's preferred stock, the company's other tool for damping STRC's price swings.
- The USD Cash balance in next Monday's 8-K, since another draw near $48 million would take the pot below $1 billion.
- How fast Strategy draws on its $18.84 billion of MSTR ATM capacity now that common issuance funds both bitcoin and the preferred buyback.