Addressing investors this week, Saylor clearly outlined his expectations regarding how long shareholders should be prepared to hold the stock. He stated that holders of MSTR shares require at least a four-year time horizon, with a preferred period of seven to ten years for the full realization of the strategy. These remarks came as MicroStrategy is going through a period of volatility that has tested even the most patient investors.
Saylor did not sugarcoat the short-term outlook and directly addressed investor frustration. He said he understands how tough it is for shareholders, but that the company must be prepared for difficult years while executing a multi-decade bitcoin accumulation plan. This comment was made against the backdrop of MicroStrategy, long known for its “never sell” bitcoin policy, having deviated from this approach four times this year already.
It is also worth noting that, as recently reported by Bitcoin.com News, the company has incurred over $102 million in bitcoin losses in just the past eight months, selling coins below their average acquisition cost to fund dividends and stock buybacks related to its series of preferred shares.
A $4.8 Billion Reserve, But No Buyback Yet
MicroStrategy currently has $4.8 billion in cash; according to Saylor, this reserve is primarily intended to cover dividend payments on STRC—the company's Stretch series preferred stock. These funds also give MicroStrategy flexibility to purchase additional bitcoins, buy back MSTR shares or preferred stock, or repay debt depending on market conditions.
Despite pressure from investors for a buyback amid MSTR's weak performance this year, Saylor made it clear that a share buyback is not a priority at the moment. He stated that a buyback would only become likely if MSTR shares were trading at a very significant discount to NAV (short for "net asset value"). The company previously approved an allocation of up to $1 billion for this purpose, but the conditions for it have not been met this year.
Under current conditions, Saylor asserts that his priority is "settling credit obligations," by which he means maintaining the trading of STRC and MicroStrategy's other preferred instruments close to their face value, rather than spending cash on share buybacks.
The Accounting Behind the Message
To date, MicroStrategy holds 840,447 $BTC, acquired for a total of approximately $63.36 billion at an average price of $75,385 per bitcoin (this is the direct source of the unrealized losses weighing on the stock and, in part, why MicroStrategy began selling small batches of bitcoin this year).
Nevertheless, the company insists its overall asset accumulation strategy is unchanged, and CEO Phong Le dismissed suggestions that recent sales signal a retreat, noting that since the start of the year the company has acquired approximately 175,000 $BTC while selling about 7,000 $BTC. Furthermore, during a recent media appearance, Le stated that MicroStrategy will resume buying bitcoin towards the end of this year.
Going forward, Saylor's statement is likely to be interpreted as a call for shareholders to view MSTR not so much as a tool tracking the price of bitcoin, but as a long-term bet on the company's capital structure, which has repeatedly demonstrated an ability to weather price declines without being forced to sell its core bitcoin position.
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