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BTC Strategy buys back STRC preferred shares, leaving Bitcoin positions unchanged
According to a Form 8-K filing with the U.S. Securities and Exchange Commission (SEC) on Monday, Strategy spent US$139.3 million to buy back 1,420,467 shares of its STRC preferred shares in the week ended September 13. That expenditure fell from $176.3 million the previous week. Previously, the company's board of directors doubled the authorization limit for its digital credit securities repurchase program to $2 billion.
All funds from this repurchase come from the USD Cash liquidity pool. The account is also used to support stock buybacks, dividend payments and Bitcoin purchases. During this period, the company did not conduct any bitcoin buying and selling operations, so its bitcoin holdings remained unchanged at 845,050 for the second consecutive week. It is reported that Strategy acquired this batch of bitcoins at an average price of US$75,412 per coin (including fees), with a total cost of US$63.73 billion.
In addition, Strategy did not repurchase any STRF, STRK or STRD preferred shares, nor did it repurchase any MSTR common shares. Currently, approximately US$1.05 billion of lines are still available in the US$2 billion digital credit securities program, while a separate US$1 billion authorization line for MSTR shares has not yet been utilized.
As of September 13, the company's dollar balance was as follows: US$5.1 billion was held in the USD Reserve account, which was used to support dividends and interest payments on preferred shares; and US$1.3 billion was held in the USD Cash account. The latter fell from $1.44 billion early last week, and the decrease was basically in line with the $139.3 million spent on buying back STRC.
Interpretation of risk assessment indicators
Based on Strategy's own credit dashboard data, assuming an annualized Bitcoin return of 10%, a volatility of 40%, and a Bitcoin price of close to $77,266, the STRC's BTC credit spread (the risk premium implied in pricing securities based on Bitcoin collateral) is approximately 57 basis points. This puts the security in the "investment-grade" range of Strategy's own rating system, as its standards regard indicators below 150 basis points as such.
The same dashboard shows that Strategy's total bitcoin reserves reach US$66.2 billion, with a comprehensive breakeven annualized return of 2.48%, and a duration of 40.3 years.
For ease of understanding, basis point is a unit used by financial experts to describe extremely small percentages-1 basis point equals 0.01%, so 57 basis points equals 0.57%. Think of the "Bitcoin credit spread" as a safety buffer: it represents the additional costs or risks associated with that investment compared to a safer investment. Strategy stipulates that as long as the risk is less than 150 basis points (or 1.5%), they will consider the investment as very safe, or "investment grade." A break-even return of 2.48% refers to the minimum annual growth Strategy needs for its Bitcoin to cover its costs; and a duration of 40.3 years means they have a long time to achieve this goal, providing a huge buffer against short-term price declines.
So, at least on paper, if bitcoin prices continue to rise, the situation looks acceptable.
Impact of MSCI proposal pending
The slowdown comes as Strategy awaits the final outcome of its MSCI proposal. The proposal could remove "non-operating companies" such as Strategy from its global equity benchmark index. Relevant consultation feedback ends on September 30, and the final decision will be made on October 16. That date could trigger billions of dollars in passive fund flows tied to Strategy index weights.
