Strategy Grabs Permission to Sell Up to $1.25B of Bitcoin Amid Capital-Structure Concerns

Strategy's newly announced Digital Credit Capital Framework has sparked debate over its potential to solve the company's capital-structure problems or merely delay them. According to Galaxy Research, Strategy needs a new strategy to monetize its massive holdings of Bitcoin after buying time with the digital credit framework.

The framework grants Strategy formal permission to sell up to $1.25 billion worth of BTC, which is currently valued at roughly $14 billion due to unrealized losses on its 847,363 BTC holdings. The framework creates a formal USD reserve policy and introduces revised dividend terms for STRC preferred shares, as well as authorizing separate repurchase programs for both preferred stock and MSTR common shares at $1 billion each.

Galaxy Research's Alex Thorn pointed out that the core of the debate is whether these new rules actually solve Strategy's capital-structure issues or simply delay them. The company sold 32 BTC for about $2.5 million in its first-ever Bitcoin sale in late May to cover a dividend payment, and JPMorgan recommends that Strategy sell its shares to raise money rather than sell Bitcoin.

Investors seem to be buying MSTR shares, as the stock price climbed 12.6% to $92.68 on the Monday after the filing was disclosed, and then soared past $100 by Wednesday, representing a 27% increase from the prior Friday's close. Benchmark Equity Research sees the framework as a good thing, keeping its Buy rating on MSTR and setting a price target of $570.