MicroStrategy's Bitcoin Sales Driven by Preferred Stock

MicroStrategy's policy of selling Bitcoin to fund dividend payments predates its Q2 earnings call by a month, according to a review of company records. The board formally adopted the Digital Credit Capital Framework on June 29, which authorized up to $1.25 billion in future sales and raised the dividend rate on STRC, the company's Variable Rate Series A Perpetual Stretch Preferred Stock, to 12% annually.

The framework also set a board-mandated USD Reserve sized specifically to cover preferred dividends and interest, not general corporate spending. The first sale under the new regime was in May, when MicroStrategy sold 32 BTC for $2.5 million to fund a STRC dividend payment directly.

The July 30 call reported on execution of this existing policy, which permitted sales of up to $1.25 billion in Bitcoin alongside a USD Reserve that grew through the period. The company's net loss was $8.22 billion for the second quarter, due largely to carrying Bitcoin below its average cost basis.

The real driver behind MicroStrategy's sales is STRC trading back at par, rather than any change of conviction on BTC. If it does, the cheaper preferred-issuance channel reopens and the mechanical pressure driving these sales eases.