In a recent discussion on the “What Bitcoin Did” podcast, Strategy (NASDAQ:MSTR) CEO Phong Le addressed the company’s stance on Bitcoin sales amid growing scrutiny of its business model. Le emphasized that while selling Bitcoin is not the company’s preferred option, it remains a viable strategy if necessary to fulfill dividend payments, particularly if the company’s shares trade below their net asset value (NAV).
Le stated, “We can sell Bitcoin and we would sell Bitcoin if we needed to to fund our dividend payments below 1 times mNAV.” This admission marks a significant shift in the narrative surrounding the company’s approach to its substantial Bitcoin holdings, which are currently valued at approximately $56.5 billion, making them the largest corporate Bitcoin treasury.
The company aims to maximize Bitcoin per share, and Le argued that if trading below NAV, selling Bitcoin could be more beneficial for shareholders than holding onto it. However, he clarified that such sales would be considered a last resort.
Additionally, Strategy Chair Michael Saylor echoed this sentiment in a company update on December 1, countering previous assertions of “never sell your Bitcoin.” Saylor acknowledged that skeptics have doubted the company’s strategy and ability to liquidate Bitcoin for dividend financing. He affirmed that not only is selling Bitcoin possible, but it can be done in a manner that allows the company to maintain and potentially grow its Bitcoin holdings.
Saylor indicated that selling a minimal fraction of its large Bitcoin reserve could suffice for dividend payments, adding that the need to sell could arise from external market pressures. This shift in messaging comes at a time when the company’s so-called market NAV (mNAV) has diminished, now standing at 0.99, indicating that the company’s market value is positioned below its Bitcoin holdings.
In response to valuation pressures, Strategy has recently introduced preferred shares to raise capital and improve liquidity without diluting existing equity holders. However, this has resulted in a substantial dividend obligation, further complicating the business model which already faces accusations resembling a Ponzi scheme due to its reliance on new capital raises to sustain existing dividend payments.
Amid these strategic adjustments, Strategy announced a cash reserve of $1.44 billion that was raised through common stock sales. This reserve is projected to cover dividend payments for the next 21 months, with hopes to extend the runway to 24 months, potentially delaying any immediate need to sell Bitcoin.
The company’s recent changes in tone and strategy may also reflect external scrutiny, culminating in a junk bond rating from S&P Global Ratings in October, which highlighted concerns regarding Strategy’s liquidity and its previous reluctance to sell its Bitcoin holdings. As the company navigates these challenges, its future tactics regarding Bitcoin sales will be watched closely by investors and analysts alike.
