Original | Odaily Planet Daily(@OdailyChina)
Author | Azuma(@azuma_eth)
Strategy, deeply embroiled in the STRC de-pegging crisis, has finally unveiled its self-rescue plan.
On the evening of June 29th, Beijing time, Strategy officially released a new plan called the "Digital Credit Capital Framework," aimed at strengthening the credit quality of its various preferred stocks (referring to STRC), enhancing liquidity, and creating long-term value for shareholders while maintaining long-term Bitcoin exposure.
According to Strategy's disclosure, the framework consists of five key components, detailed as follows:
- Cash Reserve Status;
- STRC Dividend Policy;
- Preferred Stock Repurchase Plan;
- Common Stock Repurchase Plan;
- Bitcoin Monetization Plan.
In the following sections, Odaily Planet Daily will analyze each of the five components of this plan (Odaily note: Recommended reading "STRC Depegs 11%, Can Strategy's Perpetual Motion Machine Keep Running?" ; "No STRC Re-pegging, No BTC Bull Market").
Cash Reserve: Two Years of Dividends Pre-Funded
In this announcement, Strategy first disclosed the company's cash reserve status.
As of June 28th, Strategy held approximately $2.55 billion in USD Reserve, including some funds raised from ATM offerings that have not yet been fully settled.
The key point is that Strategy has, for the first time, institutionalized the management of this cash. According to a new policy approved by the Board of Directors, this USD Reserve can now only be used for two purposes:first, to pay dividends on its preferred stocks (primarily STRC); and second, to pay interest on the company's existing debt. Any other use requires re-approval from the Board.
Based on Strategy's current annual preferred stock dividend and debt interest expenses of approximately $1.76 billion, the $2.55 billion cash is sufficient to cover about 17.4 months. Simultaneously, the company has set a hard floor:the USD Reserve must not fall below the projected dividend and interest expenses for the next 12 months, otherwise Board approval is again required.
Furthermore, Strategy has also incorporated the approved $1.25 billion BTC monetization quota (detailed in Part Five below) into the liquidity protection system. Combined, the company now has about $3.8 billion in available liquidity, covering roughly 25.9 months of preferred stock dividend and debt interest payments.
In essence, this is Strategy's direct response to the market's biggest concern over the past period — "whether the cash reserves can cover STRC's dividend payment obligations."
Strategy's funding sources heavily rely on continuous financing. Once the issuance of common stock, preferred stock, or convertible bonds is hindered, the market begins to worry about the company's ability to continue paying high dividends. This is also a major reason for STRC's persistent de-pegging. The current situation can be understood as Strategy having "pre-funded" dividends for the next two years and promising that these funds will not be diverted for other purposes. For STRC holders, this adds a safety net independent of the financing market and helps alleviate concerns about the company's short-term solvency.
Dividend Policy: Raised to 12%, but De-pegging ≠ Rate Hike
Another key piece of information in this announcement is the adjustment to the STRC dividend policy.
Strategy announced that starting July 1st, STRC's annualized dividend rate will be increased from its previous level to 12%. Going forward, Strategy will assess STRC's dividend rate monthly, considering factors including STRC's market price, market yields, credit spreads, BTC price and volatility, cash reserve coverage levels, capital market conditions, and overall capital structure.
However, Strategy also added a clarification, stressing that even if STRC falls below $100, the company may not necessarily raise the dividend. Adjusting the dividend is just one of many capital management tools. The company can also stabilize the market through cash reserve management, BTC monetization, preferred stock repurchases, common stock repurchases, etc. Therefore, it will not simplistically treat "de-pegging = rate hike" as a fixed formula.
Preferred Stock Repurchase: Up to $1 Billion, Prioritizing STRC
The most crucial information is here! If Strategy's first two measures were about strengthening STRC's appeal through market mechanisms, then this third measure marks the first time Strategy has formally introduced a tool to directly intervene in the secondary market price.
According to the announcement, Strategy has approved a repurchase plan of up to $1 billion for digital credit securities (i.e., preferred stocks), covering four products: STRC, STRF, STRD, and STRK. Strategy also explicitly stated that if management believes repurchases are value-accretive and help improve the capital structure, STRC will be the priority for repurchases.
For Strategy, this offers at least three major benefits:
- First, repurchasing discounted preferred stock is inherently a cost-effective transaction. For example, when STRC trades at $90, the company only needs to spend $90 million to retire $100 million in notional value of preferred stock, directly reducing the principal on which future dividends must be paid.
- Second, as the number of outstanding preferred shares decreases, the company's future annual dividend expenses will also decrease proportionally, further easing cash flow pressure and improving overall credit quality.
- More importantly, by becoming an actual buyer in the market, the company sends a clear signal — Strategy will not allow its digital credit products to trade at significant discounts for an extended period.
Of course, this authorization does not necessarily mean the company will immediately initiate repurchases. Strategy specifically emphasized that the $1 billion is the maximum authorization granted by the Board to management, with no fixed execution timeline or minimum execution amount requirement. Whether repurchases are actually implemented will still depend on market prices, liquidity, and management's judgment on capital allocation efficiency.
Another detail worth noting is that Strategy clearly stated that preferred stock repurchases will not use USD Reserve funds. If BTC needs to be sold in the future to fund repurchases, it must be done through the BTC Monetization Plan mentioned later. This means Strategy deliberately separates the funding uses for "guaranteeing dividend payments" and "repurchasing securities" to avoid market concerns that the company might impair the payment safety of preferred stockholders for the sake of repurchases.
Common Stock Repurchase: Also Up to $1 Billion, to Soothe Shareholders
In addition to preferred stock, Strategy has concurrently launched a repurchase plan for common stock (MSTR) of up to $1 billion.
Similar to the preferred stock plan, this authorization allows the company to repurchase MSTR shares through various methods such as open markets, block trades, privately negotiated transactions, and accelerated share repurchases (ASR), depending on market conditions. However, compared to preferred stock repurchases primarily aimed at stabilizing the digital credit system, the goal of common stock repurchases is more direct — to create long-term value for common stockholders when management believes MSTR's stock price is below its intrinsic value.
This is actually a very mature capital allocation concept in capital markets. In the past, Strategy almost always played the role of a stock issuer. Since MSTR has long enjoyed a valuation premium far above its net asset value (mNAV), the company continuously issued common stock via ATM offerings, converting the high valuation into cash to buy more Bitcoin.
But this logic is not forever valid. Strategy explicitly stated for the first time in the announcement that the company will maintain discipline in common stock financing going forward, especially being more cautious about issuing common stock when MSTR's mNAV approaches 1x. This means that when the stock has a high premium, the company can continue to issue stock for financing; when the premium narrows or the market undervalues the company, it can instead repurchase stock — in other words, Strategy aims to establish a bidirectional capital management mechanism: raise funds when overvalued, repurchase when undervalued.
Of course, like the preferred stock repurchase, this $1 billion authorization is only meant to give management more operational flexibility and does not mean Strategy will necessarily initiate repurchases immediately. Also, Strategy clearly stated that common stock repurchases will likewise not use USD Reserve funds; if BTC needs to be sold in the future to fund such repurchases, it must also be managed under the unified BTC Monetization Plan.
Bitcoin Monetization Plan: Simply Put, Selling BTC
Clearly, this is the most controversial content in the entire announcement — euphemistically called "monetization," bluntly put, it's "selling BTC."
According to the announcement, the Board has formally approved a BTC Monetization Program, authorizing the company to sell some of its BTC, primarily for three purposes:
- First, to establish up to $1.25 billion in USD Reserve;
- Second, to use for paying preferred stock dividends and debt interest, or supplementing the USD Reserve, when management believes selling BTC is more cost-effective than issuing common stock;
- Third, to provide funds for preferred stock and common stock repurchases, including related taxes, fees, and transaction costs.
Strategy also emphasized that this authorization does not necessarily mean BTC will be sold. Any sale will still comprehensively consider factors such as market environment, liquidity needs, tax and accounting impacts, and long-term shareholder value.
Nevertheless, this is a noteworthy change. Over the past few years, Michael Saylor has repeatedly emphasized Strategy's long-term holding philosophy, and the market has generally regarded it as the ultimate "diamond hands" whale. Precisely because of this, the outside world has long assumed Strategy has only one cash source — continuously issuing stock, preferred stock, and convertible bonds, then using the raised funds to buy more BTC.
Earlier this month, Strategy sold a small portion of its BTC holdings for the first time, but the scale was only 32 BTC. The official statement called it "proactive market desensitization testing." However, this announcement signifies that selling BTC has been formally incorporated into the company's capital management toolkit.
However, Strategy still emphasized BTC's position as a "core reserve asset." BTC monetization is more of a liquidity management tool than a trading strategy. In other words, the company is not preparing to profit from price swings by buying low and selling high. Instead, it has added a new funding source for itself when financing costs are too high, market conditions are unfavorable, or repurchases/supplementing cash reserves offer better cost-effectiveness.
From a capital allocation perspective, this choice may not be bad and could even be more rational. Of course, for the market, this change also means a long-held perception needs adjustment — in the past, investors almost assumed Strategy would continuously buy BTC, making it one of the most important marginal buyers in the Bitcoin market. In the future, while the company still maintains a long-term BTC holding strategy at its core, the BTC on its balance sheet is no longer just a "never-to-be-sold reserve asset" but has become a strategic asset that can participate in capital management under specific conditions.
Market Reaction: BTC Steady, MSTR & STRC Surge
Following the announcement of Strategy's plan, BTC did not experience significant volatility. It briefly rose slightly before quickly falling back to its original level, currently still oscillating around $60,000.
For Strategy, its common stock MSTR and preferred stock STRC both showed noticeable pre-market gains. As of 21:00 tonight, MSTR pre-market trades at $86.74, up 5.38%; STRC pre-market trades at $80.9, up 8.49%.
Clearly, the market holds relatively positive expectations for Strategy's self-rescue plan. Although confirming the intention to sell more BTC will inevitably attract controversy, the de-pegging of STRC and its impact on Strategy's business model are clearly more urgent problems now and more important than maintaining a "diamond hands" image.
Moving forward, whether this capital management framework can truly help STRC return to par value and reopen Strategy's financing cycle will be the real focus of market attention.
