MicroStrategy Admits It Will Sell Bitcoin if Liquidity Is Needed
The firm announced that it had reached 650,000 BTC after acquiring 130 additional tokens at an average price of $89,860.
Quick overview
- The company is establishing a $1.44 billion reserve to protect investor dividends from market volatility.
- This reserve will be funded by the sale of Class A shares and aims to cover at least twelve months of dividend payments.
- Michael Saylor emphasized that Bitcoin's volatility will not affect dividends, and the company can sell appreciated Bitcoin to finance them.
- Despite recent market pressures, the company has increased its Bitcoin holdings to 650,000 BTC, valued at approximately $56 billion.
The company is setting aside a $1.44 billion reserve, arguing that it will help ensure market volatility does not affect investor dividends.
The cryptocurrency market is closely watching Strategy after the company announced the creation of a $1.44 billion reserve, funded by the sale of Class A shares, to finance dividend and interest payments. The move caused the largest institutional holder of Bitcoin (BTC) to lose more than 10% on Monday.
The company stated that its goal is to maintain a reserve sufficient to cover “at least twelve months” of dividend payments and, eventually, to increase that coverage to 24 months “or more.” It also acknowledged that the size of the reserve will be adjusted “based on market conditions, liquidity needs, and other factors.”
Michael Saylor, Strategy’s founder and executive chairman, said: “Establishing a dollar reserve to complement our BTC reserve marks the next step in our evolution, and we believe it will better position us to navigate short-term market volatility while continuing to pursue our vision of becoming the world’s leading issuer of digital credit.”
“And we want to reassure you that Bitcoin’s volatility will never impact your dividends. To achieve that, we’ve added a U.S. dollar reserve,” Saylor added.
He also clarified: “There are skeptics and cynics who have long believed that we wouldn’t—or couldn’t—or lacked the willingness to sell Bitcoin to finance dividends, and that sometimes turns into a bearish thesis. I think it’s important to dispel that notion. Not only can the company sell Bitcoin to pay dividends, it can sell highly appreciated Bitcoin, pay the dividends, and then continue increasing its Bitcoin holdings every quarter, indefinitely.”
Possible paths for Strategy depending on Bitcoin’s movement
On Tuesday, December 2, Bitcoin climbed above $90,000, offering a respite after several weeks of downward pressure. However, Strategy estimates that if Bitcoin ends the year between $85,000 and $110,000, the company’s results for this fiscal year could range from a $5.5 billion net loss to a $6.3 billion net profit.
The company financed its Bitcoin purchases using a combination of debt and equity products, many of which offered high dividend payouts. But Bitcoin’s slump after hitting its all-time high in October has put pressure on the tech firm, which now also faces competition from alternative investment companies.
Moreover, because Strategy is included in major indices such as the Nasdaq 100, MSCI USA, and MSCI World, its exposure to Bitcoin flows into both retail and institutional portfolios through passive investment vehicles.
Given this backdrop, the market fears the company may sell part of its Bitcoin holdings. On Monday, the firm announced that it had reached 650,000 BTC after acquiring 130 additional tokens at an average price of $89,860 during the second half of November. This position is valued at roughly $56 billion and represents more than 3% of the total Bitcoin supply.
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