Strategy Unveils Digital Credit Framework to Address Capital-Structure Woes

Strategy has introduced a Digital Credit Capital Framework to address its capital-structure problems. The framework allows the company to sell up to $1.25 billion worth of Bitcoin, which it currently holds in excess of $14 billion at an unrealized loss.

The framework grants formal permission for Strategy to sell its Bitcoin and introduces revised dividend terms for its STRC preferred shares. It also authorizes separate repurchase programs for both preferred stock and MSTR common shares at $1 billion each, while keeping aside the company's $2.55 billion cash reserve for preferred dividends and debt interest.

According to Alex Thorn of Galaxy Research, the core of the debate is whether these new rules actually solve Strategy's capital-structure issues or simply delay them. The company has already sold 32 BTC for about $2.5 million in its first-ever Bitcoin sale in late May to cover a dividend payment.

JPMorgan recommends that Strategy sell its shares to raise money rather than sell Bitcoin, while Benchmark Equity Research sees the framework as a good thing and kept its Buy rating on MSTR with a price target of $570.