Business intelligence company Strategy, under the leadership of Executive Chairman Michael Saylor, has decided to implement a significant tactical shift in its corporate treasury strategy by establishing a massive cash reserve. The firm announced on Monday the creation of a $1.44 billion U.S. dollar fund, designed specifically to guarantee dividend payments to its preferred shareholders. This move responds to the need to strengthen the firm’s financial confidence at a time when digital market volatility has pressured the valuations of its main assets.
According to data revealed by CEO Phong Le, this capital reserve was funded through the strategic sale of common stock conducted last week, successfully raising $1.478 billion dollars. With these funds, Strategy ensures it has enough liquidity to cover at least 21 months of dividends on its preferred stock, with the ultimate goal of extending this coverage to 24 months or more.
Likewise, the firm did not stop its accumulation of digital assets, modestly adding 130 additional bitcoins to its balance sheet for $11.7 million, which brings its total holdings to the impressive figure of 650,000 BTC acquired at an average price of $74,436 dollars.
Is the dividend model sustainable in the face of current market volatility?
On the other hand, market reality has forced the board to recalibrate its expectations for the close of the fiscal year. Given the recent plunge that took the Bitcoin price to the $86,000 zone, far from the $150,000 dollars Strategy previously projected, they have been forced to slash their yield targets. Now, assuming a year-end price range between $85,000 and $110,000, the company has adjusted its net income guidance, ranging between a potential loss of 5.5 billion and a gain of 6.3 billion dollars.
Furthermore, the indicator known as “Bitcoin Yield,” a key metric for the corporation, has suffered a considerable reduction in its projections. The target has been lowered to a range of 22% to 26%, in contrast to the previous target of 30%, acknowledging the impact of the market slowdown. Similarly, the projected dollar gain from its cryptocurrency holdings has been adjusted downward, now sitting between 8.4 billion and 12.8 billion dollars, against the 20 billion initially expected. These news items impacted MSTR shares, which fell 4.4% in pre-market trading operations.
Finally, Strategy faces the challenge of balancing its aggressive bet on digital assets with the financial stability demanded by its traditional shareholders. The creation of this cash reserve demonstrates more prudent risk management, seeking to mitigate criticism regarding its payment capacity during times of uncertainty. Investors will closely watch if this combination of asset accumulation and dividend shielding manages to sustain share value while the market seeks a new support floor.
