Quick overview

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Michael Saylor’s Strategy sold all of its “Stretch” perpetual preferred shares to finance its most recent $1 billion weekly Bitcoin purchase, marking the first time since it introduced its high-yield securities in July.

 

The largest corporate Bitcoin holder stated in a filing with the US Securities and Exchange Commission on Monday that the tokens were purchased during the week that ended on April 12.

Saylor, who initiated the Bitcoin treasury strategy in 2020, launched a variable-rate preferred issue in a $2.5 billion offering last year to diversify the company’s funding sources. Over the past few years, Strategy has raised tens of billions of dollars by selling common shares to purchase the virtual currency.

Common shareholders became more concerned about dilution during the recent decline in the value of cryptocurrency assets, which led to the pivot. The company was able to raise money from equity sales without much dilution by taking advantage of the difference between its share prices and Bitcoin.

Since Bitcoin reached a record high in October, it has sharply declined, and that premium has vanished. Preferred shares have large dividend payments (11.5 percent for STRC securities), which raise the company’s debt load even though they are not dilutive like common shares.

Strategy raised $2.25 billion as a cash reserve during Bitcoin’s severe decline last year to reduce the risk of a liquidity crunch. Strategy has been one of the few major purchasers. During the downturn, many high-net-worth individuals and corporate holders reduced their stashes. Strategy is the biggest corporate owner of Bitcoin, with roughly $55 billion in holdings.