Strategy (formerly MicroStrategy) diluted common shareholders by $54.4 million last week, but the company was able to purchase just $45.6 million worth of Bitcoin (BTC).
MSTR’s additional 183,501 shares was much less than 84% of the proceeds deposited in the company’s treasury.
in fact, The company purchased 34% less BTC This exceeds the total dilution benefit to the company of $69.5 million for both common and preferred stockholders.
Specifically, the company sold $8.4 million in STRF with a yield of 10%, $4.4 million in STRK with a yield of 8%, $2.3 million in STRD with a yield of 10%, and $54.4 million in MSTR with a yield of 0%.
Strategy sold $15.1 million worth of these preferred shares, so the impact of that sale is not just dilutive. However, it also requires continuous dividend payments in perpetuity..
Because the company has minimal profits from its software business and plans to pay large dividends in perpetuity, management has repeatedly advised that dividends may be paid through dilution in the future.
Read more: MSTR falls by $8 billion this quarter despite inflows from global institutions
Strategy bought 34% less BTC than diluted Bitcoin last week
Embarrassingly, the company sold STRC, a type of preferred stock it had heavily promoted as the best product to provide a “comfortable retirement” to 1 billion people, for $0.
The company sold $0 worth of STRC last week, despite making STRC the centerpiece of its quarterly earnings and founder Michael Saylor repeatedly claiming that its 10.5% dividend beats bank and money market rates.
In total, STRC’s market capitalization is just 3% of Strategy’s enterprise value. In other words, 97% of the company’s success is due to selling non-STRC securities to investors.
The strategy finances the majority of its BTC purchases through MSTR dilution, and briefly promised to stop diluting shareholders at less than a 150% premium to their BTC holdings.
However, he reneged on that promise and continued. Even by Saylor’s own admission, Strategy’s enterprise value is only 33% higher than his current BTC holdings.
In addition to paying a perpetual dividend, the company has significant debt service and other operating expenses.
During the subsequent 12-month reporting period, the company spent approximately $35 million on bondholders and $278 million on selling, general and administrative expenses.
