Despite the Bitcoin bloodbath, major banks and corporates are showing renewed interest in the digital asset. While JPMorgan recently said Bitcoin looks more appealing than gold, Strategy’s Michael Saylor reiterated his long-term BTC accumulation plan.
‘We’re not going to be selling. We’re going to be buying Bitcoin. I expect we’ll be buying Bitcoin every quarter, forever,’ Saylor said in a recent interview with CNBC, despite the value of Strategy’s Bitcoin treasury hovering below its total acquisition cost.
He also shrugged off talks that Strategy will be compelled to offload Bitcoin amid declining prices, and described the narrative as ‘an unfounded concern.’
In recent weeks, Strategy purchased another $90 million worth of Bitcoins amid free-falling prices. The largest corporate holder of BTC now holds 714,644 coins, or more than 3.4% of the total BTC supply, worth $47 billion, which is $7 billion below what the firm paid to acquire it.
While famed investors like Big Short’s Michael Burry cautioned that falling BTC prices would force BTC miners to power down rigs and impact the balance sheets of corporate holders, Strategy CEO Phong Le reassured investors that BTC had to fall to a price of $8,000 per token and remain there for at least five years before the company’s balance sheet comes under considerable pressure.
Strategy Taps in Capital Markets to Fund BTC Acquisition
This week, Strategy introduced changes to its financial model, turning to capital markets to drive its BTC accumulation engine for large-scale purchases.
The company plans to issue additional perpetual preferred shares to fund further BTC purchases, easing investor concerns around the wild swings recorded by Strategy’s common stock.
Strategy will issue the Stretch (STRC) perpetual preferred shares, which pay a variable 11.25% dividend and are designed to trade close to $100. Le explained in a separate interview that the shift to preferred capital from equity capital will help steady volatility in the MSTR common stock.
Advantages of Preferred Stocks
The move towards preferred shares enables Saylor to raise money without diluting existing shareholders, especially during price dips. Furthermore, preferred shares will also provide Strategy with a cash buffer to survive a prolonged cryptocurrency bear market.
According to TD Cowen analysts, these shares enable retirees and conservative funds to gain BTC exposure with a steady yield.
The bond-like structure of perpetual preferred stocks pays fixed dividends, has priority over common stock in payouts, and has no maturity date, which can appeal to investors seeking exposure to Bitcoin while avoiding the volatility of daily price swings.
Strategy has continued to use similar financing methods, but the renewed focus on preferred shares highlights how capital markets are central to its BTC accumulation strategy. However, preferred shares remain a relatively small part of Strategy’s funding, but they’re now part of how the company buys Bitcoin.
Despite reassurances around balance sheet strength and insights into future Bitcoin purchases, the Strategy stock continues to face price pressures, declining by 5.2% on Wednesday.
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