Strategy Raises $722.5M in Preferred Stock for Bitcoin Buying Spree

Strategy has announced the pricing of its latest round of perpetual preferred stock, which the company does before announcing more Bitcoin (BTC) acquisitions. The latest round of preferred stock will be sold at $85 per share, with a 10% coupon, and will bring the company approximately $711 million in revenue. This move underscores the company's commitment to its Bitcoin-first strategy, which has become a cornerstone of its corporate identity. Strategy's aggressive accumulation of Bitcoin has positioned it as a leader in the corporate adoption of cryptocurrency, holding over 499,000 BTC.

Strategy’s most recent BTC purchase occurred on March 17, when the company acquired 130 BTC, valued at roughly $10.7 million, bringing its total holdings to 499,226 BTC, valued at $41.8 billion. The March 17 acquisition was the company’s smallest purchase on record and followed a three-week break in buying. However, Strategy co-founder Michael Saylor has signaled that the company will raise more debt and sell more equity to fuel its accumulation of Bitcoin.

On March 10, Strategy announced it would periodically sell shares of its 8% Series A perpetual strike preferred stock as part of its plan to raise an additional $21 billion to buy more Bitcoin. The company followed through on March 18 by announcing a tranche of 5 million shares in Series A perpetual preferred stock to raise additional capital. Data shows the company is still up approximately 26% all-time on its investment and is sitting on over $8.6 billion in unrealized gains despite the recent market downturn.

Strategy seeks fresh capital for BTC buying spree. The decision to upsize the offering to $722.5 million indicates a strong demand from investors, who are attracted to the 10% annual dividend offered by the preferred stock. This move underscores the company's commitment to its Bitcoin-first strategy, which has become a cornerstone of its corporate identity. Strategy's aggressive accumulation of Bitcoin has positioned it as a leader in the corporate adoption of cryptocurrency, holding over 499,000 BTC.

However, the company's strategy of not selling its Bitcoin holdings has raised concerns about its liquidity and ability to manage long-term obligations. While the recent capital raise boosts Strategy's buying power, the lack of liquidity from Bitcoin sales could pose challenges in the future. Analysts have pointed out that the company's cash ratio has declined significantly, from 2.10 in 2019 to 0.11 in 2024, which could impact its financial flexibility.

Despite these concerns, analysts maintain that the risk of bankruptcy remains low. Even in a severe scenario where Bitcoin's value drops to $30,000 by September 2027, the company would only need to liquidate about 7.3% of its Bitcoin holdings to meet a $1.1 billion bond obligation. This suggests that Strategy has a cushion to navigate potential market downturns.

To strengthen its cash flow, analysts have recommended several strategies. One approach involves lending half of its Bitcoin at a 4% annual return, which could generate enough income to cover interest payments and dividends. Another method includes using covered call options, a strategy already adopted by firms. These measures could help Strategy maintain its financial stability while continuing its Bitcoin accumulation strategy.

The recent implementation of FASB guidelines will also benefit Strategy. These guidelines allow the company to report its Bitcoin holdings at their fair market value, enabling a more accurate reflection of its financial position. This change will lead to a higher reported book value and more transparent financials, aligning Strategy's financial statements with its long-term Bitcoin strategy and reducing earnings volatility.

In summary, Strategy's decision to upsize its preferred stock offering to $722.5 million demonstrates its commitment to acquiring more Bitcoin and enhancing its working capital. While the company's aggressive Bitcoin accumulation strategy has raised concerns about liquidity, analysts believe that the risk of bankruptcy is low. By implementing new strategies to strengthen its cash flow and adopting FASB guidelines, Strategy aims to maintain its financial stability and continue its leadership in corporate Bitcoin adoption.