cryptopolitan.com
Phong Le, CEO of Strategy CEO, said on Tuesday that it is not planning to start purchasing bitcoin until its Stretch preferred stock reaches the $100 mark. It will re-evaluate its debt risk position only when the price of Bitcoin drops to $8,000.
The statements are important not only for Strategy investors but also for the broader cryptocurrency market, which has witnessed the largest corporate owner of Bitcoin staying away from the current market slump.
Le made two distinct statements during the interview:
- A price the preferred shares must reach before purchases restart
- A far lower bitcoin level that would force the firm to rethink the debt underpinning its strategy.
Strategy waits for STRC to return to par
Strategy has not added to its bitcoin position since late June. Le tied any return to buying to the recovery of the preferred stock the company uses to fund those purchases, known as Stretch (STRC).
When Stretch gets back to par, we’ll issue more. We’ll buy Bitcoin. Though I am unsure how long that would take.
– CEO, Phong Le
Issuing the shares only works above par, because selling them below $100 raises money on unfavorable terms. STRC has traded under $100 since mid-May and changed hands near $89 on Wednesday, according to Decrypt.
Le said building a dollar cushion has been the main lever pulling the price up, noting the shares had recovered from a low in the $75 range toward $90 as the reserve grew.
Rather than purchasing any assets, the company has been busy acquiring cash over the last few weeks. It issued common stock worth $467 million in order to build its cash balance to $3 billion, an amount which according to Le will be sufficient for two years of dividend payments. He characterized the change as part of Strategy’s transition from “being a Bitcoin treasury company to a full digital capital platform.”
Le draws a much lower bitcoin danger line
Pressed on a worst-case scenario, Le put the danger zone well below the roughly $64,700 bitcoin was fetching during the interview. Only if the price fell toward $8,000 to $10,000, he said, would the company “have to consider some of the risk associated with our debt.”
Above that, he called the balance sheet secure and compared the slump to the 2022 bear market Strategy survived. Le also pushed back on the idea that Strategy is retreating as Bitcoin’s dominant buyer.
He pointed to holdings of 843,775 BTC as of the July 12 SEC filing, close to 4% of the 21 million coins that will ever exist, and argued the firm’s recent $216 million in sales “did not move the market,” which trades $30 billion to $40 billion a day.
Coin Bureau CEO Nic Puckrin has publicly modeled Strategy’s solvency threshold at $20,000, roughly twice as high as Le’s number.
Strategy’s new framework gives it room to pause
The context behind Le’s reassurances is a rough year. MSTR stock is down more than 77% over the past 12 months, and bitcoin has slid 45% in the same period to about half its October record, as Yahoo Finance reported from the same interview.
The sales began last month when Executive Chairman Michael Saylor started trimming the stack, a move that raised questions about the debt-and-equity model he built in 2020. Standard Chartered analysts have described the selling as “mostly noise.” The June retooling is what gave management the room to sell.
As Cryptopolitan earlier reported, Strategy adopted a Digital Credit Capital Framework authorizing up to $1.25 billion in discretionary bitcoin sales, two $1 billion buyback programs, and a rise in the STRC dividend to 12%. The firm still carries roughly $9 billion in unrealized losses on its 843,775 coins and a $1 billion debt maturing in 2027.