Strategy has reported a significant development in its ongoing Bitcoin acquisition efforts, marking its fourth-largest purchase of the asset this year. The Tysons Corner, Virginia-based company recently acquired 2,500 Bitcoin for $168 million, raising its total holdings to approximately 717,100 Bitcoin, valued at around $48 billion as the cryptocurrency’s price dipped to nearly $67,000, according to CoinGecko.
To finance this latest acquisition, Strategy issued $90.5 million in common stock, along with $78.5 million from its variable rate preferred shares. These preferred shares, known as STRC, currently offer monthly dividends at an annualized rate of 11.25%, providing a cash-income option for investors. This shift underlines a new strategy for acquiring Bitcoin, where issuing preferred shares has become increasingly prioritized as part of what co-founder Michael Saylor describes as “digital credit.”
However, the company’s financial strategies and its mounting debt have ignited discussions and raised eyebrows among investors and analysts alike. Strategy’s stock has seen a significant decline, dropping 64% over the past six months, prompting scrutiny over its long-term viability. Many are particularly concerned about the company’s convertible debt, which becomes eligible for redemption in 2028. Saylor has indicated plans to address an $8.2 billion convertible debt through “equitization” over the next three to six years instead of direct cash repayments.
In a recent appearance on CNBC’s “Squawk Box,” Saylor maintained that the firm is in a robust position, asserting that Strategy would not need to liquidate any Bitcoin even if the cryptocurrency experienced a 90% decline and remained there for four years. This assertion has sparked a viral response on social media, with financial commentators questioning the practicality of his approach, particularly regarding potential refinancing options.
As valuations of Bitcoin have continued to decrease from their record highs earlier this month, Strategy’s holdings have also seen a decline in value. The company has expended $54.5 billion on Bitcoin, leading to an approximate paper loss of 12%, translating to roughly $3.6 billion. Market anticipation surrounds whether Strategy will be compelled to sell any Bitcoin this year, with predictions suggesting an 18% chance of such an event, down from an earlier forecast of 36%.
The current market conditions are not isolated to Strategy alone. Other Bitcoin-centric firms are also facing challenges; for instance, Metaplanet, Japan’s fourth-largest corporate Bitcoin holder, recently reported a ¥102 billion ($664 million) loss in Q4, without having made any new Bitcoin purchases this year. As competitors pull back on acquisitions, Strategy’s moves stand out more vividly, particularly as it accounted for 93% of Bitcoin additions among public firms earlier this year.
