coindesk.com
The world's largest publicly traded company holding bitcoin, Strategy (MSTR), has authorized a new bitcoin monetization program, giving the company the flexibility to sell a portion of its bitcoin holdings to strengthen its balance sheet, support its perpetual preferred securities, and fund stock buybacks.
The program, announced Monday as part of Strategy's new Digital Credit Capital Framework, marks the company's first formal authorization to monetize its bitcoin treasury for specific purposes. While the company emphasized it is not obligated to sell any bitcoin, management now has board approval to do so when it determines such sales are more advantageous than issuing Class A common stock or pursuing other financing options.
The filing does not set a fixed limit on bitcoin sales. Instead, it authorizes BTC monetization for specific purposes, including selling up to $1.25 billion of bitcoin to build the company's USD Reserve, which is used to fund preferred stock dividends and interest payments. Bitcoin may also be sold to replenish the reserve after distributions are made.
The monetization program also authorizes Strategy to sell bitcoin to finance up to $1 billion of Digital Credit Securities repurchases and up to $1 billion of Class A common stock buybacks. Any bitcoin monetization beyond these authorized purposes would require additional board approval. The repurchase programs have no expiration date.
The monetization program is part of a broader capital allocation strategy that also includes increasing the dividend on Strategy's preferred stock STRC to 12%, from 11.5%, adopting a formal USD Reserve policy, and requiring sufficient cash reserves to cover at least 12 months of preferred stock dividends and interest obligations.
Michael Saylor, Founder and Executive Chairman of Strategy said, “At the same time, Digital Credit requires liquidity, discipline, and active capital management. This framework is designed to strengthen credit quality and enable the Company to reduce expected preferred stock dividend payments when accretive. This framework also sets out how we plan to use our capital management toolkit while maintaining our commitment to long-term Bitcoin exposure.”
MSTR shares are up 3% following the announcement, while bitcoin trades below $60,000.