Analysts at Benchmark Equity Research have reaffirmed their confidence in Strategy (NASDAQ: MSTR), which holds the title of the largest corporate Bitcoin holder. The renewed support follows the company’s unveiling of a comprehensive five-part Digital Credit Capital Framework, aimed at enhancing its operational flexibility during fluctuating market conditions.
On June 29, Strategy introduced this framework, which encompasses a $2.55 billion reserve designated to cover approximately 17.4 months of dividends. In addition, the plan includes a $1 billion buyback of common stock, an equal amount for a preferred-share repurchase covering its STRC, STRF, STRD, and STRK series, as well as board approval to liquidate up to $1.25 billion in Bitcoin from its considerable treasury of 847,363 BTC.
Mark Palmer, Senior Equity Research Analyst at Benchmark, emphasized that this plan equips management with the ability to operate Strategy’s capital engine “in reverse” when market pressures arise. This could involve repurchasing shares, liquidating Bitcoin to fulfill financial obligations, and halting stock issuance when the trading value dips below net asset value. Palmer characterized the company as a proactive manager of its capital structure, adept at addressing the varying concerns of investors.
He detailed that each component of the framework directly addresses key investor anxieties, ranging from defined capital allocation to enhanced preferred dividends and proactive buybacks to counter dilution concerns. This strategic pivot signifies a fundamental shift for Strategy, transitioning from a model focused on continuous issuance to one that emphasizes judicious timing—issuing shares when capital is inexpensive and repurchasing them when they trade at favorable valuations.
Benchmark analysts have responded to prevailing apprehensions about potential aggressive Bitcoin liquidation, arguing such fears underestimate the company’s scale and capacity. Notably, Strategy sold only 32 Bitcoin in May, with Palmer asserting that the $1.25 billion Bitcoin liquidation program is a mere “rounding error” in the context of its vast holdings.
The announcement of this new plan arrives on the heels of a roughly 12% decline in MSTR stock over the previous week, alongside the variable-rate Stretch preferred stock (STRC) slipping below the $80 mark. Despite the volatility, Benchmark has maintained its “Buy” rating with a striking $570 price target, representing a substantial 515% upside from its closing price on June 29.
In the wake of the framework’s announcement, shares of Strategy surged by 12.6%, reaching $92.68. However, as of press time, MSTR traded approximately 4.35% lower in pre-market sessions at around $88.65, while STRC experienced a 1.63% drop to approximately $82.31.
