Lightning Five Chain Whip! Strategy's Self-Rescue Plan Officially Unveiled

Original by Odaily Planet Daily (@OdailyChina)

Authored by Azuma (@azuma_eth)

Strategy, deeply mired in the STRC de-pegging crisis, has finally unveiled its self-rescue plan.

On the evening of June 29 (Beijing time), Strategy officially released a new initiative called the "Digital Credit Capital Framework," aimed at enhancing the credit quality of its various preferred stocks (clearly referring to STRC), improving liquidity, and creating long-term value for shareholders while maintaining long-term Bitcoin exposure.

According to Strategy's disclosure, the framework is composed of five main components, detailed as follows:

• Cash Reserve Position;
• STRC Dividend Policy;
• Preferred Stock Repurchase Program;
• Common Stock Repurchase Program;
• Bitcoin Monetization Program.

Below, Odaily Planet Daily provides a detailed analysis of each of the five components within this plan (Odaily note: Recommended reading: "STRC De-pegs 11%, Can Strategy's Perpetual Motion Machine Still Turn?"; "Without STRC Re-pegging, There Will Be No Bitcoin Bull Run").

Cash Reserves: Two Years of Dividends Pre-funded

In this announcement, Strategy first disclosed its cash reserve position.

As of June 28, Strategy held approximately $2.55 billion in U.S. Dollar Reserves (USD Reserve), which includes funds raised from ATM offerings that have not yet been fully settled.

The key point is that Strategy has, for the first time, instituted a formal management policy for this cash. According to the new policy approved by the board, this USD Reserve can now only be used for two purposes: first, to pay dividends on its preferred stocks (primarily STRC); and second, to pay interest expenses on the company's existing debt. Any other use would require another board approval.

Calculated against Strategy's current annual preferred stock dividend and debt interest expenses of approximately $1.76 billion, the $2.55 billion in cash is sufficient to cover about 17.4 months. Additionally, the company has set a hard floor: future USD Reserves must not fall below an amount covering the projected dividend and interest expenses for the next 12 months; otherwise, board approval is required.

Furthermore, Strategy has incorporated the approved $1.25 billion BTC monetization capacity (detailed in part five below) into its liquidity safety net. Combined, the company currently has approximately $3.8 billion in available liquidity, covering roughly 25.9 months of preferred stock dividends and debt interest expenses.

Essentially, this is Strategy's direct response to the market's biggest concern over the past period: "Can cash reserves cover STRC dividend obligations?"

Strategy's funding sources are heavily reliant on continuous financing. If issuance of common stock, preferred stock, or convertible bonds is hindered, the market begins to worry about the company's ability to sustain high dividend payouts, which is a significant reason for STRC's persistent de-pegging. The current situation can be understood as Strategy "pre-depositing" dividends for the next two years, pledging that these funds won't be diverted elsewhere. For STRC holders, this adds a safety cushion independent of the financing market, helping to alleviate concerns about the company's short-term solvency.

Dividend Policy: Raised to 12%, But De-pegging ≠ Rate Hike

Another key piece of information in this announcement is the adjustment to STRC's dividend policy.

Strategy announced that, effective July 1, the annualized dividend rate for STRC will be raised to 12% from its previous level. Going forward, Strategy will evaluate STRC's dividend rate monthly, considering factors such as STRC's market price, market yields, credit spreads, Bitcoin price and volatility, cash reserve coverage levels, capital market conditions, and overall capital structure.

However, Strategy was also careful to "hedge its bets" this time, emphasizing that even if STRC falls below $100, the company may not necessarily raise the dividend. Adjusting dividends is just one of many capital management tools. The company can equally stabilize the market through cash reserve management, BTC monetization, preferred stock buybacks, or common stock buybacks. Therefore, it will not simplistically treat "de-pegging = rate hike" as a fixed formula.

Preferred Stock Buyback: Up to $1 Billion, Priority on STRC

Here comes the most crucial information! While the first two measures aimed to strengthen STRC's appeal through market mechanisms, the third measure marks the first time Strategy has formally introduced a tool for directly intervening in the secondary market price.

According to the announcement, Strategy has approved a digital credit security (preferred stock) repurchase program of up to $1 billion, covering four preferred stock products: STRC, STRF, STRD, and STRK. Strategy also explicitly stated that if management believes the repurchase is accretive and helps improve the capital structure, STRC will be the priority target for repurchase.

For Strategy, this approach offers at least three benefits:

• First, repurchasing discounted preferred stock is inherently a good deal. For example, when STRC trades at $90, the company only needs to spend $90 million to retire preferred stock with a nominal value of $100 million, directly reducing the principal base for future dividend payments.
• Second, as the number of outstanding preferred shares decreases, the company's future annual dividend expenses will also decrease correspondingly, further improving cash flow pressure and overall credit quality.
• More importantly, when the company becomes an actual buyer in the market, it sends a clear signal—Strategy will not allow its digital credit products to trade at significant discounts in the secondary market for an extended period.

Of course, this authorization does not mean the company will immediately initiate buybacks. Strategy specifically emphasized that the $1 billion is the maximum authorized amount granted by the board to management, with no fixed execution timeline or minimum execution amount requirement. Whether buybacks are actually implemented will depend on market prices, liquidity, and management's judgment on capital allocation efficiency.

Additionally, one detail is worth noting. Strategy explicitly stated that preferred stock buybacks will not use USD reserve funds. If future BTC sales are needed to fund buybacks, they must be executed through the BTC Monetization Program mentioned later. This means Strategy deliberately segregated the uses of funds for "securing dividend payments" and "repurchasing securities," aiming to prevent market concerns that the company might compromise the payment security of preferred stock holders for the sake of buybacks.

Common Stock Buyback: Also Up to $1 Billion, Assuaging Shareholders

In addition to preferred stock, Strategy also concurrently introduced a common stock (MSTR) repurchase program of up to $1 billion.

Similar to the preferred stock program, this authorization allows the company to repurchase MSTR shares through various methods, including open market purchases, block trades, privately negotiated transactions, and accelerated share repurchases (ASR), depending on market conditions. However, compared to the preferred stock buyback aimed primarily at stabilizing the digital credit system, the goal of the common stock buyback is more direct: to create long-term value for common stock shareholders when management believes MSTR's stock price is undervalued relative to its intrinsic value.

This is actually a very mature capital allocation concept in the capital markets. Previously, Strategy almost always acted as a stock issuer. Since MSTR has long enjoyed a valuation premium significantly above its Net Asset Value (mNAV), the company continuously issued common stock through ATM offerings, converting the high valuation into cash to buy more Bitcoin.

However, this logic is not forever valid. For the first time, Strategy explicitly stated in the announcement that the company will maintain discipline in common stock financing going forward, especially being more cautious about issuing common stock when MSTR's mNAV approaches 1x. This means that when the stock trades at a high premium, the company can continue to issue shares for financing; when the premium narrows, or the market undervalues the company, it can instead repurchase shares—in other words, Strategy aims to establish a two-way capital management mechanism: financing when overvalued, repurchasing when undervalued.

Of course, like the preferred stock buyback, this $1 billion authorization merely grants management more operational flexibility and does not mean Strategy will immediately initiate buybacks. Concurrently, Strategy also explicitly stated that common stock buybacks will likewise not use USD reserve funds; any future BTC sales intended to fund buybacks must also be managed under the unified BTC Monetization Program.

Bitcoin Monetization Program: Selling Bitcoin

Clearly, this is the most controversial part of the entire announcement—to put it nicely, it's "monetization"; bluntly, it's "selling coins."

According to the announcement, the board has formally approved a BTC Monetization Program, authorizing the company to sell a portion of its BTC for three main purposes:

• First, to establish a USD Reserve of up to $1.25 billion;
• Second, when management believes selling BTC is more advantageous than issuing common stock, to pay preferred stock dividends and debt interest, or supplement the USD Reserve;
• Third, to fund preferred and common stock repurchases, including related taxes and transaction costs.

Strategy also emphasized that this authorization does not mean BTC will definitely be sold. Any decision to sell will still comprehensively consider market conditions, liquidity needs, tax and accounting implications, and long-term shareholder value.

Regardless, this is a notable change. Over the past few years, Michael Saylor has repeatedly emphasized Strategy's long-term holding philosophy, and the market generally perceived it as an ultimate "buy-and-hold" whale. Consequently, the market had long implicitly assumed Strategy had only one source of cash: continuously issuing stock, preferred stock, and convertible bonds, then using the proceeds to buy more BTC.

Earlier this month, Strategy sold a portion of its BTC holdings for the first time, but the amount was merely 32 BTC, which the company described as a "proactive market desensitization test." However, this latest announcement signifies that selling BTC has now been formally incorporated into the company's capital management toolkit.

Nevertheless, Strategy still emphasized BTC's status as a "core reserve asset." BTC monetization is more of a liquidity management tool than a trading strategy. In other words, the company is not preparing to profit from selling high and buying low, but is adding a new funding source when financing costs are too high, market conditions are unfavorable, or repurchases or supplementing cash reserves offer better value.

From a capital allocation perspective, this choice isn't necessarily negative and may even be more rational. Of course, for the market, this change also means a long-held perception needs adjustment. In the past, investors almost defaulted on the expectation that Strategy would continuously buy BTC, making it one of the most important marginal buyers in the Bitcoin market. Going forward, while the company still holds long-term BTC accumulation as its core strategy, the BTC on its balance sheet is no longer just a "never-sell reserve asset" but has become a strategic asset capable of participating in capital management under specific conditions.

Market Reaction: BTC Steady as a Rock, MSTR & STRC Surge

Following the release of Strategy's plan, BTC did not experience significant volatility. After a brief upward push, it quickly retraced to its original level, currently oscillating around the $60,000 mark.

Regarding Strategy's stock, its common stock MSTR and preferred stock STRC both saw notable pre-market increases. As of 21:00 today (Beijing time), MSTR was trading at $86.74 in pre-market, up 5.38%; STRC was trading at $80.9, up 8.49%.

Clearly, the market holds a relatively positive outlook on Strategy's self-rescue plan. While the confirmation that more BTC will be sold is bound to attract controversy, the immediate problem of STRC's de-pegging and its impact on Strategy's business model is more urgent and more critical than maintaining the "diamond hands" persona.

Going forward, the market's true focus will be on whether this capital management framework can successfully bring STRC back to par value and re-open Strategy's financing cycle.