Strategy’s Days of Never Selling Bitcoin Are Done

Strategy founder Michael Saylor is famous for saying “never sell,” but as crypto craters, he’s changed his tune. Bitcoin holding company Strategy is considering selling off as much as $1.25 billion worth of bitcoin after first parting with 32 tokens in late May. 

The company is trying to win back investor confidence as cracks appear in its buy, buy, buy strategy. The so-called infinite money glitch that Strategy relied on, mainly issuing equity and buying bitcoin with the funds, has struggled to keep spinning under bitcoin’s prolonged downturn. Bitcoin briefly dipped below $60,000 last week, down from its October peak of more than $126,000. 

Saylor’s backtracking is part of a wider plan to overhaul Strategy’s financing model.

Not Smooth Sayling

Strategy has amassed more than 847,000 bitcoin, buying more tokens even as bitcoin’s price climbed higher and higher. It’s paid an average of around $75,000 per token, about $15,000 more than bitcoin’s price has been hovering around. But the company continued to pay its shareholders, hurting its cash reserves. Now, it’s trying to build up cash to make sure it can meet its obligations even if bitcoin takes longer to bounce back:

• In addition to considering additional bitcoin sales, Strategy will buy back as much as $1 billion of its preferred stock and up to another $1 billion of Class A shares. It’s also raising the dividend to 12% on its most popular preferred stock called Stretch. Strategy said it’ll bulk up its cash reserves to cover 12 months.
• The overall plan serves to boost the confidence of investors who doubting whether Strategy can keep its commitments while bitcoin continues to reach new bottoms for the year. Strategy’s common shares climbed last week back above the key inflection point of $100.

Two-Way Street: JPMorgan analysts raised a yellow flag on Strategy’s new plan, saying that bitcoin’s biggest corporate holder giving itself the option of selling as needed adds more uncertainty to a market that’s already filled with FUD (a crypto-ism for fear, uncertainty and doubt). When Strategy buys, other investors feel emboldened to do the same. And when Strategy sells, well, some investors are likely to follow its lead then, too.

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