Key Takeaways:
Strategy will not resume buying Bitcoin until its STRC preferred stock recovers to the $100 par value, CEO Phong Le said, as the preferred shares trade near $87.
Strategy CEO Phong Le tied the company's next Bitcoin purchase to STRC preferred stock returning to its $100 par value, as the shares traded near $87 on July 15.
"We'll continue to build that. And yeah, when Stretch gets back to par, we'll issue more. We'll buy more Bitcoin," Le said in a Bloomberg interview, though he acknowledged he did not know how long the recovery would take.
STRC has traded below $100 since mid-May and hit an intraday low of $71.25 on June 26 before recovering to about $89. Strategy raised the annual dividend rate to 12% effective July 1, the eighth increase since the instrument launched, as annual preferred dividend and interest obligations now exceed $1.76 billion against the company's $124.3 million in quarterly software revenue.
The pause marks a strategic shift for the world's largest corporate Bitcoin holder, which sold $216 million in BTC last week — its largest disposal since 2020 — to fund dividends and build a $3 billion cash reserve. Strategy holds 843,775 BTC worth roughly $50.6 billion at current prices, carrying about $9 billion in unrealized losses after acquiring coins at an average $75,700 each.
Le drew a sharp line on how low Bitcoin would need to fall before the company reassessed its debt structure. Only if the price dropped toward $8,000 to $10,000, he said, would Strategy "have to consider some of the risk associated with our debt." Coin Bureau CEO Nic Puckrin has publicly modeled Strategy's solvency threshold at $20,000, roughly twice Le's figure.
Standard Chartered's global head of digital assets research, Geoff Kendrick, described the recent Bitcoin sales as "mostly noise rather than a signal" in a note to clients, maintaining the bank's $100,000 year-end Bitcoin price target. He argued that Strategy's holdings "heavily over-collateralize" the STRC instrument and that the preferred stock should trade back to par if the company articulates its new approach clearly.
The STRC Pressure Loop
The mechanics behind the pivot create a self-reinforcing dynamic. When STRC falls below par, the dividend rate rises automatically, increasing cash burn and forcing either more share issuance — diluting MSTR holders — or additional Bitcoin sales that undermine the "never sell" thesis that supported the company's premium valuation. MSTR stock has declined more than 77% over the past 12 months to close at $94.64, down from a 52-week high of $457.22.
Strategy's new Digital Credit Capital Framework, adopted in late June, authorizes up to $1.25 billion in discretionary Bitcoin sales and two $1 billion buyback programs. The company sold 4.82 million common shares to raise $466.7 million in fresh capital during the week ending July 13, focusing on building cash rather than buying Bitcoin. The $3 billion reserve provides roughly 20 months of preferred dividend and interest coverage at current obligation levels.
Bitcoin traded near $64,800 on July 16, down 45% from its October record. Bitcoin ETFs recorded their largest quarterly outflow since launch during the second quarter, with outflows persisting into July. Wells Fargo disclosed a 125% increase in its Strategy stake, though other institutional holders have trimmed exposure to both MSTR and Bitcoin products.
Strategy's second-quarter earnings report on July 30 will be the next critical data point, with analyst estimates ranging widely from $0.78 to $52 per share, reflecting deep uncertainty about how unrealized Bitcoin losses will affect reported results.
This article is for informational purposes only and does not constitute investment advice.
