Image Credit: Shutterstock
Key Takeaways
- Saylor said a buyback isn’t a priority now but could happen if MSTR trades at a steep enough discount to NAV.
- Strategy is holding $4.8 billion in cash, built up after STRC’s price volatility exposed the need for a larger buffer.
- Saylor said the company now needs flexibility to sell Bitcoin as well as buy it, departing from its accumulate-only approach.
Strategy Executive Chairman Michael Saylor said a share buyback is not a current priority for the company, though he did not rule one out if MSTR shares fall to a steep enough discount. The comments came during a Monday Q&A session as the company holds a $4.8 billion cash reserve and works to stabilize its preferred stock, STRC.
A Rough Stretch For Common Shareholders
MSTR has fallen about 38% this year and 73% year-over-year, a decline Saylor attributed to Bitcoin’s price drop, combined with the company’s continued issuance of common stock to fund Bitcoin purchases, build cash reserves, pay dividends, and repurchase preferred shares. Shares gained about 5% Monday after Saylor left the door open to a future buyback. He said:
“If MSTR is trading at a very, very deep discount to NAV, then probably you would see us do something like that,”
Saylor added that, for now, Strategy is prioritizing its preferred stock business, particularly STRC, over repurchasing common shares.
Why Strategy Keeps Issuing New Shares
Chief Executive Phong Le defended the company’s practice of issuing new MSTR shares, a practice some investors have criticized as dilutive.
Le said selling shares can benefit existing holders when MSTR trades above the net asset value of the Bitcoin backing each share, since Strategy uses the proceeds to buy more Bitcoin. In that scenario, he said, the amount of Bitcoin backing each MSTR share can increase even as the total share count grows.
Building A Larger Cash Buffer
Le said a recent decline in STRC’s price taught the company it needed to hold more cash on hand to cover the preferred stock’s dividend payments. Strategy now holds $4.8 billion in U.S. dollars, up from levels the company held before the STRC volatility.
Saylor said Strategy plans to maintain large cash balances going forward, giving it more flexibility to buy Bitcoin, repurchase MSTR or preferred shares, or pay down debt as conditions warrant.
That flexibility extends to Bitcoin holdings directly. Saylor said Strategy needs the ability to sell Bitcoin as well as buy it, a departure from the accumulate-only strategy the company has followed since it began building its Bitcoin treasury.
Saylor also described how Bitcoin’s price relative to its own trading history could influence future purchases. When Bitcoin trades far above its 200-week moving average, he said, Strategy may retain more of the cash it raises rather than deploying it into new purchases.
When the price sits near or below that long-term average, he said, it could signal a buying opportunity for the company.
What STRC Is Designed To Do
STRC operates differently from MSTR within Strategy’s structure. Rather than aiming for share-price appreciation, the preferred stock is designed to generate income through dividends while holding a stable price near its $100 issue level.
Saylor said Strategy is prepared to sell more STRC shares above $100 and to support the price through buybacks if it trades below that level. He described that price stability as a core part of what the product is meant to offer investors, distinct from the volatility built into holding MSTR common stock directly.
Setting Expectations For Shareholders
Saylor ruled out acquiring profitable operating businesses as a way to diversify Strategy’s cash flow, saying doing so would add complexity and make the company harder for investors to value against its Bitcoin holdings.
He also set expectations for how long common shareholders should plan to hold the stock. Saylor said MSTR investors should have a time horizon of at least four years, with seven to 10 years preferable given the swings the stock has shown.
“I feel your pain. But I think we have to be prepared to have difficult years.”
The remarks come as Bitcoin trades near $64,245, a level well below the highs that coincided with MSTR’s strongest stretches over the past two years.
Strategy’s stock has moved largely in tandem with Bitcoin’s price since the company adopted its treasury strategy, and Monday’s gain broke a pattern of sharper losses in MSTR relative to the underlying asset in recent weeks.
