Strategy Changes Course: It May Sell $1.25 Billion Worth of Bitcoin. Shares Soared

On Monday, shares of Strategy, the largest corporate holder of Bitcoin, rose by more than 12%—the first increase after eight days of declines. The company announced a share buyback program and authorized the sale of up to $1.25 billion worth of Bitcoin to build a liquidity reserve. Previously, Strategy had only been buying tokens, but due to the collapse of the cryptocurrency market, the company’s stock price fell below the value of its Bitcoin reserves for the first time, Reuters reports.

Michael Saylor's Strategy has approved two share buyback programs, each worth up to $1 billion—one for common stock and one for preferred stock. In addition, the company said it would take a more disciplined approach to issuing common stock, especially when its shares are trading at a level equivalent to the value of its Bitcoin holdings, according to Bloomberg.

“We intend to alternate between issuing securities when raising capital appears attractive and repurchasing securities when our instruments are trading at levels where buybacks increase shareholder value,” Strategy CEO Fong Le said in a press release.

To strengthen its cash position, the largest public holder of Bitcoin—which owns approximately 847,363 tokens—authorized the sale of up to $1.25 billion worth of them.

The decline in the value of the cryptocurrency with the largest market capitalization led to a revision of the company’s strategy. On Friday, the valuation metric—which had previously been one of the reasons for an optimistic outlook on the company—turned negative, according to Bloomberg. It showed that Strategy’s financial advantage had disappeared. The metric in question is mNAV—the ratio of the company’s value, including debt and preferred shares, to the value of its Bitcoin reserves, the agency explains. This metric has fallen below parity: according to Strategy’s website, the company’s mNAV ratio stood at 0.99 at the close of the previous trading session, Reuters reports. It is considered a good time to buy shares if this metric is above one. On Monday, the mNAV rose to 1.05.

At the same time, Strategy's market capitalization at the close of the previous session stood at $29.54 billion. And the value of the bitcoins the company holds stood at $50.4 billion on Sunday.

During Monday's trading session, Strategy shares rose by more than 12% to $93.42 per share. Prior to that, the company's shares had been falling for the previous eight sessions. Over the past month, they have lost 44.5% of their value, and over the past year, they have fallen by nearly 80%. This has undermined the financial advantage that for years allowed Sailor to issue securities and channel the raised funds into increasingly large Bitcoin purchases, Bloomberg reports. The decline in Strategy’s stock raises questions about whether the self-sustaining funding model underlying the company’s Bitcoin strategy can work amid a protracted downturn, the agency notes.

“Ultimately, this [new] policy framework signals that Strategy is managing Bitcoin as a treasury asset with real discipline when it comes to liquidity, rather than simply as an ideological stance, — Bitget Wallet analyst Lacey Zhang told Bloomberg. — Whether this is good or bad depends on where Bitcoin goes from here. That has always been the only question that matters here.”

"This is a significant move by Sailor, and the market is viewing it as a positive development," Nick Pakrin, an intermarket analyst and founder of Coin Bureau, told Reuters.

“The mNAV compression is a more serious problem,” LO’s head of research, Adam Morgan McCarthy, explained to Bloomberg. “If the market starts to view Strategy as a slow-moving ETF with the added burden of preferred stock obligations, this multiple won’t recover. That’s why they had to do something.”

“There are two possible scenarios moving forward: either Strategy starts selling bitcoins, or its stock drops enough for someone to buy the company to gain control over it and acquire bitcoins at below-market prices,” Andrei Grachev, managing partner at market maker DWF Labs, told Reuters. “In any case, for serious investors, this uncertainty alone is a reason to wait. And right now, money is flowing into AI, not cryptocurrencies.”

According to MarketWatch, 17 out of 19 analysts tracking Strategy shares recommend buying them. Two others advise holding the stock in a portfolio. There are no negative ratings for these shares. The Wall Street consensus price is $336, which is 308% higher than the closing price on June 26.

This article was AI-translated and verified by a human editor