Strategy Refocuses on Digital Credit Platform for Bitcoin Funding

Strategy, the world's largest bitcoin treasury firm, is adopting new ways to generate cash as its cost of debt financing rises. The company aims to double its bitcoin holdings per share over seven years through its 'digital credit' strategy.

With a limited total issuance of bitcoins at 21 million tokens, Strategy believes rising demand should drive up the price. As of August 2, Strategy owned 842,138 bitcoins, or almost exactly 4% of the maximum total issuance.

Up to 20% of bitcoin's total issuance is lost forever, meaning Strategy's holdings may be closer to 5%. The company's 'free float' becomes smaller as it captures more of the market, pushing prices higher.

Strategy has turned to financial engineering due to its consistently unprofitable operating units. It uses convertible bond offerings and preferred stock to raise cash for bitcoin purchases. Executive chair Michael Saylor thinks he's found a new way to fund the company with an increased focus on its Series A Perpetual Stretch Preferred stock (STRC).

Saylor detailed the plan in the latest earnings call, explaining that Strategy will refocus on the Series A preferred as a 'digital credit platform.' This preferred series will be the center of how Strategy manages its financing moving forward.