Behind Strategy's financial structure optimization: the stable support of 700,000 Bitcoins

The credit risk of Strategy is easing. According to the latest news, this Bitcoin treasury company’s perpetual preferred stock has a nominal value of $8.36 billion, surpassing its $8.2 billion convertible debt. This seemingly technical adjustment to the capital structure actually reflects Strategy’s deeper logic in seeking financial stability through aggressive Bitcoin investments.

Subtle Shifts in Financial Structure

Strategy is undergoing an optimization of its capital structure. Let’s first understand the differences between these two financing tools:

The key to this shift is that: convertible bonds must be repaid or converted at maturity, which introduces refinancing risk and volatility linked to stock price. Perpetual preferred stock, on the other hand, does not require principal repayment, only fixed dividends, resulting in lower risk and volatility.

Stable Financial Foundation

Strategy’s preferred stock portfolio includes four instruments, with annual dividends totaling approximately $876 million. To ensure stable dividend payments, the company holds $2.25 billion in reserves. This reserve size is relatively sufficient to improve dividend coverage and reduce short-term refinancing risks.

From the perspective of common equity, the number of circulating shares has increased from 76 million in 2020 to over 310 million. This expansion may alleviate dilution pressures from future bond conversions and provide the company with more flexible capital operations.

Connection to Aggressive Investment Strategies

The timing of this financial structure optimization is noteworthy. According to related information, Strategy announced on January 20th that it increased its Bitcoin holdings by 22,305 BTC, costing $2.13 billion, with an average cost of $95,284 per BTC. As of January 19th, its total Bitcoin holdings reached 709,715 BTC, with a total cost of approximately $53.92 billion, and an average cost of $75,979.

The stabilization of the financial structure contrasts interestingly with its aggressive Bitcoin investments. While optimizing debt structure and reducing refinancing risk, Strategy continues to significantly increase its Bitcoin holdings. This indicates that a stable financial foundation is supporting its aggressive investment strategy.

Market Signal Shift

From market reactions, this financial optimization may be changing institutional investors’ attitudes. Related news shows that a U.S. pension fund has purchased MicroStrategy stock, attempting to indirectly invest in Bitcoin through this familiar equity structure. Given that global pension assets exceed $70 trillion, even moderate allocation adjustments could imply substantial future capital inflows.

Future Focus

This financial restructuring by Strategy reflects a delicate balance: maintaining financial stability while continuing to aggressively accumulate Bitcoin. As the preferred stock’s value becomes established and reserves are ample, the company may have greater flexibility in financing, potentially supporting further large-scale Bitcoin acquisitions.

Summary

Strategy has successfully mitigated credit risk by having the value of preferred stock exceed that of convertible bonds. This shift in the financial structure reduces refinancing risk and balance sheet volatility, providing a more stable financing foundation. Sufficient reserves and expanded equity structure further reinforce this stability. Based on this solid financial footing, Strategy’s continued Bitcoin accumulation strategy appears more confident and robust. The stabilization of the financial structure and the aggressive investment approach are creating a positive feedback loop, which may be a key support for Strategy’s long-term Bitcoin accumulation strategy.