Strategy's $66 Billion Bitcoin Machine Rides on Fragile Market Access

Strategy, formerly MicroStrategy, now holds an impressive 840,447 Bitcoin worth approximately $66 billion. This makes it the largest corporate holder of Bitcoin globally, controlling roughly 4% of the cryptocurrency's total supply cap.

An analysis from Regime Intelligence published on August 19 sheds light on the math behind this massive holding. Strategy carries about $22 billion in senior claims against its Bitcoin pile, split between $15.5 billion in perpetual preferred stock and $6.7 billion in convertible notes. These instruments impose annualized cash obligations of around $1.76 billion, mainly from preferred dividends.

However, the company's original business, enterprise analytics software, generates almost nothing relative to these obligations. Its operating cash flow for the first half of 2022 came in at a mere $9.85 million, covering just three days' worth of annual obligations.

The company has raised an estimated $40 to $50 billion through equity and preferred issuances since its first Bitcoin purchase in August 2020. The preferred stock, branded under names like STRC and marketed as 'digital credit,' functions as a novel financial product blending traditional fixed-income characteristics with indirect Bitcoin exposure.

Between August 17 and 23, Strategy sold approximately $2 billion worth of MSTR shares through at-the-market programs. Additionally, the company has run a limited BTC Monetization Program, selling small batches of Bitcoin averaging between 1,638 and 2,225 BTC per transaction.