Strategy updated its BTC holdings with a small purchase of just 130 BTC. Instead of a larger acquisition, Strategy announced a new vehicle, a USD reserve holding $1.4B.
Strategy announced the addition of 130 BTC, expanding its treasury to a total of 650,000 BTC. The latest purchase was at an average price of $89,960, leaving the general average price at $74,436.
Strategy used MSTR common stock to buy a small amount of BTC, while also building a USD reserve to serve its dividend obligations. | Source: Strategy SEC filingsThe latest purchase was valued at $11.7M, and Strategy announced that it used MSTR common stock for the acquisition.
The newest addition of BTC follows a week where Strategy skipped buying more BTC, raising concerns about the viability of its playbook.
During that week, MSTR common stock dipped to a local low of $166. Strategy’s mNav metric is at 0.9%, suggesting there is no hype to buy more MSTR. Despite this, the company still managed to raise cash, but did not pour it into a weakening BTC.
Strategy announces USD reserve
Strategy’s recent BTC purchases raised concerns about the company’s ability to repay its dividends. The current goal of Strategy is to be able to keep its obligations to the holders of preferred shares, hence the decision to retain the cash proceeds from the latest ATM placement of common stock.
Strategy was not expected to issue more MSTR, due to the ongoing dilution. Without a BTC bull market, the dilution was erasing the value of the common stock even faster.
However, Strategy decided to use its common stock one more time to build a fiat reserve for future obligations.
Strategy announced it has established a US dollar reserve of $1.44B to support the dividend payments on its preferred stock, as well as outstanding interest payments. Strategy aimed for a reserve sufficient to cover at least 12 months of dividend payments, and the USD reserve will be strengthened over time to cover 24 months of dividends.
USD reserve boosts trust in preferred stock
Previously, Strategy has announced that its goal is to turn fiat into BTC, so the reserve seems to go against that logic. However, a reserve set up for dividends may help Strategy raise more funds through preferred shares, from investors seeking yield.
“The maintenance of this USD reserve, as well as its terms and amount, remain subject to Strategy’s sole and absolute discretion and Strategy may adjust the USD reserve from time-to-time based on market conditions, liquidity needs and other factors,” wrote the company in its recent filing with the US SEC.
At the same time, MSTR still undergoes dilution, but at least buys Strategy time to wait for another BTC bull market.
MSTR continued to slide for the past week, trading at $174.75. The common stock is down by 33% in the past month, while BTC lost 17.56% in November. Strategy’s purchases appear to have lost their spark in setting off BTC rallies, as the leading coin retreated to $85,766.08.
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Source: https://www.cryptopolitan.com/strategy-buys-130-btc-establish-usd-reserve/
