Strategy (MSTR) currently holds $4.8 billion in cash in the form of US dollars. This accumulation of funds was born from lessons the company learned while facing the volatility of STRC, an instrument originally designed to be stable at $100. From that volatility, the company realized the need for cash reserves to pay dividends to preferred stock shareholders.
This accumulation of cash comes during a tough phase for retail investors. MSTR shares are down 38% this year and have plunged 73% compared to last year. This sharp decline was driven by two main sentiments: weakening Bitcoin prices in the market and the company’s continuous issuance of new shares.
Michael Saylor emphasized that buying back shares (buyback) is not a priority at this time. However, he is not closing the door completely. A buyback could be done if MSTR shares are traded at a deep discount to their net asset value (NAV).
Selling Shares Without Dilution
The issuance of new shares is often avoided by investors for fear of their ownership stake shrinking. However, CEO Phong Le has a different calculation. According to him, selling MSTR shares above the value of the assets backing them can actually increase the amount of Bitcoin per share, rather than diluting it.
Regarding the STRC instrument, Strategy is now preparing a flexible two-way approach. They are ready to sell more STRC when its price climbs above the $100 limit, and then buy it back when its price falls below that limit.
This two-way pattern apparently also applies to the company’s main asset. “We must be able to sell Bitcoin as well as buy it,” Saylor said. This statement is a clear confirmation that Strategy now has the flexibility to sell a portion of their crypto holdings.
200-Week Buy Signal
When to buy and when to hold is now measured by a single guideline: the 200-week average price. When Bitcoin soars far above that average, Strategy will choose to hold more cash. Conversely, when the price approaches or drops below that line, they see it as a signal to buy again.
Meanwhile, Saylor ensured that his company will not deviate from its core business. He stated that he would not buy other operating businesses just to generate regular cash flow, because such acquisitions would make Strategy’s structure more complex.
Shareholders must adjust their time expectations facing this turbulence. Saylor suggests MSTR investors have an investment horizon of at least four years, ideally seven to ten years. “I feel your pain,” he said. This advice gives one clear message: this stock is not for those who are reluctant to park funds for the long term.
Reported by CoinDesk.
Read also: What Is Bitcoin Halving?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
