Grayscale urges Strategy to consider Bitcoin sale
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- Grayscale's head of research Zach Pandl said he hopes Strategy will sell approximately US$3 billion in Bitcoin to strengthen its balance sheet and improve investor confidence.
- Strategy faces about US$1.2 billion in annual preferred dividend obligations, while its STRC preferred shares have traded well below par value.
- CryptoQuant and other market participants argue the company has alternative options to support its capital structure without selling Bitcoin.
Grayscale head of research Zach Pandl said he hopes Strategy will sell approximately US$3 billion of its Bitcoin (CRYPTO:BTC) holdings to cover most of its cash obligations over the next two years and strengthen confidence in the company's capital structure.
Pandl said he instead expects Strategy to increase the dividend rate on its STRC preferred shares by 50 basis points, adding about US$100 million in annual obligations, which he argued may do little to improve market confidence.
Strategy currently faces approximately US$1.2 billion in annual preferred dividend obligations, while STRC recently traded as low as US$71.25, representing a 28.75% discount to its US$100 par value, and MSTR shares declined 26.86% during the week to close at US$82.31.
The company's latest filing with the US Securities and Exchange Commission showed it purchased 520 Bitcoin for US$34.9 million between June 15 and June 21 and increased its US dollar cash reserves by US$300 million to US$1.4 billion.
Strategy said it intends to continue rebuilding its cash reserves to support the credit quality of its preferred securities, providing approximately 14 months of dividend coverage based on current obligations.
CryptoQuant argued the company could strengthen its financial position by slowing Bitcoin purchases and preserving cash, while also noting that Strategy is not required to sell Bitcoin to support STRC because it has other tools available.
Bitcoin advocate Samson Mow said STRC contains a mechanism that may help restore its market price over time by halting new share issuance below the US$100 reference price while increasing the effective yield available to new investors.
At the time of reporting, Bitcoin price was $59,390.51.
