On July 3, Galaxy Research Director Alex Thorn stated that the capital management adjustments announced by Strategy on Monday mark a significant turning point. In the weeks prior, Strategy's preferred stock "digital credit" system faced pressure, with the preferred stock STRC falling below its $100 par value and hitting a historical low of $71.25 on June 26, leading the market to question how the company would pay the increasingly high preferred stock dividends. Strategy subsequently announced a new digital credit capital framework, which includes a board-approved dollar reserve policy, a revised STRC dividend policy, a $1 billion preferred securities buyback authorization, a $1 billion MSTR common stock buyback authorization, and a BTC monetization plan. Additionally, the board raised the annual dividend rate for STRC from 11.5% to 12%, applicable to semi-annual dividends for record dates on or after July 1. Following the announcement, MSTR rose 12.6% to approximately $92.70, while STRC increased by 12.2% to about $83.70. Thorn believes that Strategy's approach is wise but may not permanently resolve the structural issues. The company still has a large preferred stock system and ongoing payment obligations, and will face $6.7 billion in convertible debt maturities in 2027 and 2028. The market's real concern is not Strategy's lack of assets, but whether it has sufficient dollar liquidity to pay dividends without harming BTC holders, MSTR common stock shareholders, or preferred stockholders. By raising over $1 billion in cash through common stock sales, establishing a minimum cash reserve policy for 12 months, and increasing its current cash coverage to about 17 months, Strategy has bought itself time. The most controversial aspect is the BTC monetization plan, which seems to indicate that Strategy may sell BTC from time to time. Thorn does not wish to see Strategy sell Bitcoin, as the company's identity and MSTR premium are built on its narrative as a long-term BTC exposure tool, and selling BTC would undermine this story. However, he also believes that if selling a small amount of BTC can prevent a disorderly spiral in capital structure, protect preferred stocks, and wait for a better market environment, this path could be justified. Strategy should explore how to generate income from its BTC assets without directly selling spot BTC, including conservatively lending a small amount of isolated BTC or using options strategies to gain volatility returns.

BTC0.41%

STRC2.03%

MSTR0.77%

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Perspective: Strategy's Structural Issues Remain Unresolved, Should Explore Earning from Bitcoin Holdings

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