Strategy Outspends Bitcoin Buyback by Nearly Nine Times
Key Summary
Strategy, a company backed by Donald Trump, spent nearly nine times more on buying back its STRC preferred shares than on purchasing Bitcoin last week, highlighting the competing demands on its capital. The company repurchased 1,932,145 shares of its variable-rate STRC preferred stock for $192.4 million, while buying 250 Bitcoin for $21.5 million. This trend suggests Strategy is prioritizing its preferred securities over Bitcoin accumulation, which has been slowing down. The company's cash balance is also dwindling, raising concerns about its ability to fund its operations and dividend payments.
Company Background
Strategy, formerly known as MicroStrategy, is a company backed by President Donald Trump. The company's 'Build the NeXT' vision reflects its commitment to trust, partnership, and growth. Strategy serves over 12 million registered users across 200 countries and regions.
Recent Developments
Last week, Strategy bought 250 Bitcoin for $21.5 million while spending $192.4 million to repurchase its STRC preferred shares. This represents a nearly nine times difference in spending between the two activities. The company's recent price drop follows a broader pullback from its recent highs, with support found near the $147-$150 price area.
Capital Allocation
Strategy's capital allocation is becoming increasingly complex. The company's digital credit securities repurchase program has been accelerating, with repurchases rising from $176.3 million during Sept. 28–Oct. 4 to $192.4 million during Oct. 5–11. The company reported $354.8 million of remaining authorization under its program.
Dividend Payments
Strategy's preferred-stock repurchases would eliminate approximately $23.2 million in annualized dividend payments, assuming that rate remains unchanged. The company is seeking approval to move its four US-listed preferred securities to daily dividend payments, with STRC transitioning first. Under the proposal, dividends would accrue daily and be paid the next business day, replacing STRC's current semi-monthly schedule without increasing its annual dividend rate.
Cash Balance
Strategy's USD Cash balance declined from $833.4 million a week earlier, down $192.9 million, nearly matching the amount spent on STRC repurchases. The company held $4.88 billion in its dedicated USD Reserve and another $640.5 million in USD Cash, bringing total dollar-denominated liquidity to approximately $5.52 billion. The USD Cash balance is significant, as it can finance Bitcoin purchases, preferred-share repurchases, and other capital management activities.
Shareholder Vote
Shareholders will vote on the daily-dividend proposal on Oct. 28. The company is seeking approval to move its four US-listed preferred securities to daily dividend payments, with STRC transitioning first. If approved, STRC's first daily record date would be Nov. 1, with payment scheduled for Nov. 2.