Strategy, formerly known as MicroStrategy, recently announced that it successfully raised over $700 million through a preferred stock offering with the intention of expanding its Bitcoin holdings. The firm confirmed on March 21 that it sold 8.5 million shares of its Series A Perpetual STRF Preferred Stock at a price of $85 per share, offering a 10% annual dividend. Initially targeting $500 million, Strategy exceeded its goal by 40%, raising a total of $711 million.
Unlike its previous offering, this latest round of funding does not include conversion rights into common shares. Jeff Park, head of alpha strategies at Bitwise, noted that investor interest in STRF was primarily driven by fixed income opportunities rather than exposure to Strategy’s volatile stock. The higher yield and improved pricing terms contributed to the successful response, leading to the surpassing of funds raised compared to the previous offering.
With over 499,000 BTC currently in its possession, valued at over $40 billion, Strategy has positioned itself as a company focused on aggressive Bitcoin accumulation. However, concerns have arisen regarding the company’s long-term financial management due to its decision not to sell any of its Bitcoin holdings, resulting in limited liquidity. Bitwise highlighted a decrease in liquidity ratios, with the cash ratio dropping from 2.10 in 2019 to just 0.11 in 2024.
Despite these challenges, Bitwise believes that the risk of bankruptcy for Strategy remains low. Even in a scenario where Bitcoin drops to $30,000 by September 2027, the company would only need to liquidate a small percentage of its holdings to meet obligations. To improve cash flow, Bitwise recommended strategies such as lending a portion of its Bitcoin at a 4% annual return or exploring covered call options.
Additionally, the implementation of FASB would allow Strategy to report its BTC holdings at their fair market value, leading to more accurate financial reporting and decreased earnings volatility. This would align the company’s financial statements with its long-term Bitcoin strategy more effectively.
In conclusion, Strategy’s recent capital raise has provided the company with increased buying power for Bitcoin acquisitions. While challenges remain in managing long-term obligations and liquidity, the company has options to strengthen its financial position and continue its Bitcoin-first model with confidence.