- Strategy announced topping up its Bitcoin reserve, bringing its supply to 650,000 BTC.
- The crypto community raised some red flags over its latest disclosure.
- The company’s CEO revealed a plan to sell Bitcoin as a last resort.
- The business established a USD reserve to ensure 12 months’ payment of dividends to investors.
Strategy (formerly MicroStrategy) announced on Monday its top-up of 130 Bitcoin (BTC) worth $11.7 million at an average purchase price of 89,960 per BTC. The move increases the company’s holdings to 650,000 BTC, locking in nearly 3.1% of Bitcoin’s 21 million total supply.
The business revealed that it already spent around $48.38 billion on its Bitcoin accumulation.
Several Red Flags in Strategy and Saylor’s Latest Bitcoin Purchase Announcement
Strategy’s latest batch of purchases, which occurred between November 17 and 30, drew widespread criticism. Some believe the company deliberately delayed its announcement last week because its previous seven-day Bitcoin acquisition was too low to warrant a standalone public disclosure, and as an effort to suppress negative speculations about its minuscule buy.
Additionally, Strategy Executive Chairman Michael Saylor evidently omitted his company’s year-to-date (YTD) BTC yield in his related post today. Upon closer examination of the company’s metrics, the figures declined to 24.6% from the 27.8% reported on November 17. Meanwhile, its BTC yield quarter-to-date (QTD) dived to -1.1%.
The metric indicates how the business is effectively increasing its Bitcoin holdings relative to its common shares (MSTR). Hence, a reduction in its rate means its aggressive capital raise through stock offerings currently risks significant shareholder dilution.
Strategy’s Plan of Selling BTC
To date, Strategy’s mNAV (Market Net Asset Value) is at 1.19. This means the ratio of its market capitalization to the market value of its total Bitcoin holdings is still trading at a premium.
However, the notably shrinking ratio during the bear market has raised concerns about the company’s potential sale of its Bitcoin holdings to meet its financial obligations to investors, particularly to cover its dividends. Strategy CEO Phong Le admitted that such a decision is on the table, but only as a last resort if the institution’s mNAV drops below 1.
Establishment of a USD Reserve
To ensure it meets its obligations to investors, Strategy consequently announced the establishment of a USD reserve. The allocation, worth $1.44 billion, would guarantee 12 months of dividend payments to shareholders, especially during market volatility.
The company said that it funded the reserve using the net proceeds of its MSTR shares. It plans to expand the treasury’s capability to cover at least 24 months of dividends under favorable market conditions.
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