Strategy's Bitcoin Sell Plan May Be Just Delaying the Inevitable

Galaxy Research's Alex Thorn believes Strategy's (Nasdaq: MSTR) Digital Credit Capital Framework may not solve its capital-structure problems but only delay them. The framework, announced in a recent 8-K regulatory filing, allows the company to sell up to $1.25 billion worth of Bitcoin and introduces revised dividend terms for its STRC preferred shares.

The firm is facing a massive unrealized loss of roughly $14 billion on its holdings of 847,363 BTC. The framework also restricts the use of Strategy's $2.55 billion cash reserve to preferred dividends and debt interest. If the current spending rates are retained, this reserve will last for about 17 months.

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