Strategy lifts cash reserve to $3 billion while pausing Bitcoin buys

Strategy added to its cash pile instead of buying more Bitcoin last week, a shift retail investors are watching because the company’s stock has become a leveraged way to track Bitcoin sentiment. The company raised $467 million by issuing common stock and lifted its USD Reserve to $3 billion, according to a company announcement.

The move marked the third consecutive week without a Bitcoin purchase by Strategy, which is the largest corporate holder of the cryptocurrency. A cash reserve is money kept available for near-term needs, and in Strategy’s case the focus is covering preferred stock dividends and debt interest rather than adding to its Bitcoin position.

Benchmark-StoneX Managing Director and Senior Research Analyst Mark Palmer said in a Monday note that the latest fundraising increased Strategy’s cash reserves by about 18% in one step. Palmer said the reserve now gives the company more than 20 months of coverage for its annual dividend and interest obligations, which total $1.76 billion.

“The entirety of the company's capital markets activity during the week was channeled toward fortifying the balance sheet's cash cushion,” Palmer wrote, according to the note.

Why the cash build matters

Strategy recently adopted a capital management framework that lays out conditions under which it could sell Bitcoin. That was a meaningful change for a company best known for steadily accumulating the token under Executive Chairman Michael Saylor.

The company has already used Bitcoin sales to support cash needs. Strategy sold 3,588 Bitcoin for about $216 million between June 29 and July 5 to cover preferred-share dividends and add to the reserve, according to prior company disclosures cited by Decrypt. The new $467 million common stock raise was more than double that amount.

Common stock issuance raises cash by selling more ordinary shares to investors. That can strengthen a balance sheet, but it can also dilute existing shareholders because the same company is divided among more shares.

Preferred stock is a different type of equity that typically carries set dividend terms. Strategy’s Stretch preferred stock, listed as STRC, currently offers a 12% annual dividend, according to Decrypt. STRC traded around $87.04 after nearing a one-week high in premarket trading and has stayed below its $100 par value since mid-May. Par value is the reference amount used to calculate some preferred-stock payments and redemption terms.

Shares and Bitcoin holdings

Strategy shares fell 4% after the opening bell to about $90.80, according to Yahoo Finance. The stock has dropped 18% over the past month, though it has stabilized since touching a 28-month low of $81.81 in late June.

Bitcoin recently traded around $62,328, down 2.53%, according to CoinGecko price data displayed by Decrypt. At that price, Strategy’s 843,775 Bitcoin holdings were worth roughly $53 billion, according to Decrypt.

Decrypt reported that the company’s Bitcoin stockpile was about $11 billion underwater at the recent Bitcoin price. In plain terms, that means the market value of the holdings was below what the company paid for them in aggregate.

For investors, the takeaway is that Strategy’s story now has two moving parts: Bitcoin exposure and balance-sheet management. The company is still heavily tied to Bitcoin’s price, but its latest capital move shows management is also prioritizing cash coverage for obligations tied to its preferred shares and debt.

This story draws on original reporting from Decrypt.