Strategy's Return to Bitcoin Buying Lasted Exactly One Week
Strategy, the Bitcoin treasury company, has been making headlines in recent weeks for its significant purchases of the cryptocurrency. However, in a surprising turn of events, the company has revealed that it bought no Bitcoin in the week leading up to September 7, a week after ending a two-month BTC purchasing drought.
According to a filing submitted by Strategy on Tuesday, the company spent $176.3 million buying back its own preferred stock instead. All of this money went towards purchasing 1,810,885 shares of STRC, the variable rate perpetual stretch preferred.
Preferred Stock Repurchase Program
Strategy's decision to repurchase its own preferred stock is significant, as it indicates a shift in the company's priorities. The company has repurchased none of its STRF, STRK, or STRD preferreds, nor has it bought back any of its MSTR common stock.
The funds used for the repurchase came from Strategy's USD Cash pool, which currently stands at $1.44 billion. This pool of money can be deployed on Bitcoin or any other asset, giving Strategy the flexibility to make strategic investments.
Strategy's board has doubled the authorization behind the spending, lifting the digital credit securities repurchase program from $1 billion to $2 billion. As of September 7, $1.19 billion of this amount remained available. A separate $1 billion program for MSTR stock remains untouched, indicating that Strategy is not looking to buy back its common stock at this time.
Bitcoin Holdings and Unrealized Gain
Strategy currently holds 845,050 BTC, which it purchased for $63.73 billion at an average price of $75,412 per coin, including fees. With Bitcoin trading around $77,760 at the time of writing, Strategy's stack is worth roughly $65.7 billion, representing an unrealized gain of about 3%.
However, last week's purchase of Bitcoin at $80,318 per coin is currently underwater, indicating that Strategy may have bought high and sold low.
USD Balances and Cash Deployment
Strategy's dollar balances now stand at $5.10 billion in the USD Reserve, which covers preferred dividends and interest, and $1.44 billion in USD Cash, the pot management can deploy on Bitcoin or anything else.
The $176.3 million of buybacks came out of the latter, leaving Strategy with a significant amount of cash to deploy on its assets.
MSCI Index Rule and Global Benchmarks
Strategy's Chair Michael Saylor and CEO Phong Le have asked MSCI to withdraw an index rule that would remove Strategy from its global benchmarks, calling it discriminatory. Funds tracking those indexes hold 3.1% of Strategy's basic shares.
MSCI's consultation on this matter closes at the end of September, with a decision due on October 16. The outcome of this decision will have significant implications for Strategy's global presence and reputation.
What to Watch Next
Strategy's decision to buy back its preferred stock and not purchase any Bitcoin in the week leading up to September 7 is a significant development in the company's strategy. As the company continues to navigate the cryptocurrency market, investors will be watching closely to see how it deploys its USD Cash pool and whether it will return to buying Bitcoin.
The outcome of MSCI's consultation on the index rule will also have significant implications for Strategy's global presence and reputation. As the company continues to grow and expand its operations, it will be interesting to see how it responds to this challenge and whether it will be able to maintain its position in the global market.
One thing is certain: Strategy's actions in the coming weeks and months will have significant implications for the cryptocurrency market and its investors.