From “never sell” to active sell-off! Strategy (MSTR.US) lost money and reduced its holdings of 1,638 bitcoins, and plans to expand the cash out target to $5 billion

The Zhitong Finance App learned that when the price of Bitcoin hovered around $62,000, far below the company's historical holding costs, the Bitcoin giant whale that once “just bought and didn't sell” was undergoing a profound strategic transformation. On August 3, the 8-K document submitted by Strategy (MSTR.US) to the US Securities and Exchange Commission (SEC) showed that the company sold 1,638 bitcoins for US$104.73 million in the week ending August 2, at an average price of about US$63,957. This price is about 15% lower than the company's overall average holding cost of $75,419, which means that each Bitcoin recorded a book loss of about $11,462.

This sale is Strategy's largest weekly holdings reduction since it officially launched the “Digital Credit Capital Framework” in late June. The company broke the previous unwritten “never sell” rule and authorized the sale of up to $5 billion of Bitcoin under the current capital plan to supplement US dollar reserves, pay dividends, and buy back securities. This amount is four times higher than the $1.25 billion plan proposed in early July, marking a complete transformation of this former “Bitcoin hoarder” to an active capital management model.

The latest sell-off: The financial logic behind losses and holdings reduction

The sale of 1,638 bitcoins is the latest round of active holdings reduction operations since Strategy officially launched the “Digital Credit Capital Framework” in late June. The average selling price of $63,957 was far lower than the company's overall holding cost of $75,419, which meant that the deal was a “loss reduction” at the book level.

The proceeds from the sale were accurately split into two main parts:

$52.4 million: to pay the preferred stock dividend

$52.3 million: for the repurchase of STRC preferred shares

In the same period, Strategy also sold 3,011,361 shares of MSTR common stock through the Market Price Issuance (ATM) program, raising a net capital of approximately US$290.6 million. The funds were also used for defensive allocations — $250 million into dollar reserves, $28.9 million to buy back STRC, and $11.7 million to supplement cash balances.

As of August 2, the company's US dollar reserve balance had reached US$4 billion. CEO Phong Le said during the earnings call that the company has bought 174,895 bitcoins and sold 3,620 bitcoins at the same time since the beginning of the year. Although the sales volume is definitely not small, it accounts for an extremely low share compared to its total holdings of 840,000 units.

Strategic transformation: from “just buy, don't sell” to “active capital management”

Strategy's series of operations marks the most significant strategic shift since it transformed into a Bitcoin finance company in 2020. On June 29 of this year, the company officially launched the “Digital Credit Capital Framework”, completely breaking the previous unwritten “never sell” rule.

The core elements of the new framework include:

Mandatory dollar reserves: Requires the establishment of large-scale US dollar reserves to specifically cover expected dividends and interest expenses for at least 12 months

Bitcoin Monetization Authorization: Initial approval for the sale of up to $125 million in Bitcoin to replenish reserves, pay dividends, or repurchases

Dual Repurchase Authorization: Approval of $1 billion each to repurchase Preferred Shares and Class A Common Shares

Today, the framework is being fully implemented — and is far larger than initially anticipated.

CEO Phong Le identified the triple uses of the $5 billion cash out plan during the earnings call:

Strengthening US dollar reserves: up to $1.25 billion, increasing the cash buffer to about $5 billion

Payment of preferred stock dividends: estimated to require around $1.76 billion

Facilitating share buybacks: an additional $2 billion

With the three goals combined, the planned sale of crypto assets has reached US$5.01 billion, a fourfold increase from the US$1.25 billion plan proposed in early July. Michael Saylor said that according to the current plan, the upper limit is 5 billion US dollars, but the total amount may eventually be higher.

Preferred Stock Management: “Eliminate” high-interest debt with 11% discount

In this strategic transformation, the management of preferred stock STRC is one of the core goals. CEO Phong Le made it clear during the earnings call that the company's main corporate goal is for STRC to trade steadily around the face value of 99 to 100 US dollars over a long period of time. To this end, Strategy plans to proactively manage capital when needed by selling Bitcoin, securities repurchases, dividend adjustments, and issuing shares.

As it turns out, the company is advancing this goal in a very financially smart way. Last week, Strategy used $81.2 million to buy back 912,143 STRC shares, with an average repurchase price of about $89.02. Since STRC's face value is $100, this means that the company prematurely cancelled its high-yield dividend obligation at a discount of approximately 11%.

In late June, the company raised STRC's dividend rate to 12.00% annualized. By buying back when the share price is below face value, Strategy was able to permanently reduce the burden of future dividends on preferred shares — a pretty clever financial operation.

On July 31, the Board of Directors announced a half-month cash dividend of $0.50 per share to STRC Preferred Shares. As of August 2, the remaining amount of the preferred share repurchase plan was approximately US$893.8 million.