Galaxy: Strategy structural issues have not been fully resolved yet, and we should explore using its BTC holdings to generate returns.

ME News, July 4 (UTC+8) — Alex Thorn, Head of Research at Galaxy, said in a post that the capital management adjustments announced by Strategy on Monday are a major turning point for the company. In the prior weeks, Strategy’s preferred stock “digital credit” system came under pressure. Preferred shares STRC fell below their $100 par value and hit a historical low of $71.25 on June 26, leading the market to question how the company would pay the ever-increasing preferred stock dividends.

Strategy subsequently announced a new digital credit capital framework, including the board-approved dollar reserve policy, a revised STRC dividend policy, a $1 billion preferred securities repurchase authorization, a $1 billion MSTR common stock repurchase authorization, and a BTC liquidation plan. At the same time, the board raised the annualized dividend rate for STRC from 11.5% to 12%, applicable to semi-monthly dividends with record dates on or after July 1. After the announcement, MSTR rose 12.6% on Monday to approximately $92.70, while STRC rose 12.2% to approximately $83.70.

Thorn believes Strategy’s approach is prudent, but may not permanently resolve structural problems. The company still has a large preferred stock system and ongoing payment obligations, and it will also face $6.7 billion of convertible bond maturities in 2027 and 2028. What the market is truly concerned about is not that Strategy lacks assets, but whether it has sufficient dollar liquidity to pay dividends without harming BTC holders, MSTR common shareholders, or preferred stock holders. By raising more than $1 billion in cash through common stock sales, setting a 12-month minimum cash reserve policy, and increasing its current cash coverage ratio to about 17 months, Strategy has bought itself time.

Most controversial is the BTC liquidation plan—its wording appears to clearly indicate that Strategy may sell BTC from time to time. Thorn does not want to see Strategy sell Bitcoin, because the company’s identity and the MSTR premium are built on the narrative that it is a long-term BTC exposure vehicle, and selling BTC would weaken that story. However, he also believes that if selling a small amount of BTC can prevent a disorderly spiral in the capital structure, protect preferred shares, and allow the company to wait for better market conditions, this approach can be defended.

Strategy should explore how to use the BTC assets it holds to generate returns without directly selling spot BTC. This includes lending out a small amount of segregated BTC under conservative terms, or using options strategies to capture volatility-related returns. (Source: ChainCatcher)