The strategy previously known as MicroStrategy revealed it has secured more than $700 million from recent preferred stocks designed to buy more Bitcoin.
On March 21, the company confirmed the sale of 8.5 million shares of Series A’s permanent STRF preferred shares. Each share priced at $85 and a 10% dividend was offered per year.
Strategy’s STRF originally intended to raise $500 million, but by raising $7111 million, it surpassed its target by over 40%.
This latest issue does not allow conversion to common stock, unlike the company’s previous STRK offerings with 8% yield and conversion rights.
Jeff Park, head of Bitwise’s Alpha Strategies, noted that investors’ desire for STRF is driven by bonds rather than exposed to strategic volatile stocks.
He noted that higher yields and improved pricing conditions contributed to a stronger response, and helped raise more funds than STRF.
Can the strategy maintain the Bitcoin first model?
Capital Raising has increased the purchasing power of its strategy, but concerns have risen about the company’s ability to manage its long-term obligations.
The strategy holds over 499,000 BTC (valued over $40 billion) and builds a corporate identity for aggressive Bitcoin accumulation. However, the decision to avoid selling shares has limited liquidity in the company.
Bitwise pointed out that this situation has led to a decline in liquidity ratio. That cash ratio has dropped from 2.10 in 2019 to just 0.11 in 2024.
However, Bitise claims that the risk of bankruptcy remains low. Even under a serious scenario where Vitcoin will drop to $30,000 by September 2027, the company will need to liquidate approximately 7.3% of Bitcoin to meet its $1.1 billion debt obligations.
Nonetheless, Bitwise proposes new strategies to enhance the cash flow of companies. One recommendation involves lending half of Bitcoin with 4% annual revenue.
Another approach includes covered call options, methods already adopted by companies like Japan’s Metaplanet.
Bitwise concluded that the recent implementation of the FASB will allow the strategy to report BTC holdings at fair market value.
“The company can more accurately reflect its Bitcoin holdings, leading to reported book value and more transparent financials. As a result, the volatility of the strategy’s revenue will decrease and its financial statements will be more adapted to the long-term Bitcoin strategy.”
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