Strategy adopted a new capital framework that gives the company authority to monetize Bitcoin, repurchase securities, and raise the dividend on its STRC preferred stock to 12%.
The update, disclosed in an SEC 8-K filed Sunday, marks the company’s first structured response to criticism over its balance sheet.
Digital Credit Framework Sets Reserve Rules
The Michael Saylor-led firm introduced the plan as its Digital Credit Capital Framework, a five-part approach covering liquidity, dividends, repurchases, and Bitcoin monetization. The filing said Strategy’s board approved a USD reserve policy tied to preferred dividends and debt interest.
Under the policy, Strategy’s $2.55 billion cash reserve can be used only for preferred dividends and debt interest payments. Management is expected to maintain 12 months of coverage. Based on annual obligations of about $1.76 billion, the reserve provides around 17.4 months of coverage.
The company disclosed a $14 billion setback on its 847,363 BTC holdings, with Bitcoin trading near $60,500. The framework follows criticism from Peter Schiff, CryptoQuant analysts, and Ripple CEO Brad Garlinghouse.
Buybacks And Bitcoin Monetization Enter Plan
Strategy’s board authorized two repurchase programs totaling $2 billion. One program covers up to $1 billion of STRC, STRF, STRD, and STRK preferred securities. The other allows up to $1 billion in repurchases of Strategy’s Class A common stock, MSTR.
The authorization does not require Strategy to buy back securities. The company may suspend or end either program without notice.
The Bitcoin monetization program gives management discretion to sell Bitcoin when appropriate. Proceeds, if sales occur, may support the cash reserve, dividends, or repurchase activity.
The board approved $1.25 billion in initial Bitcoin monetization capacity. If fully used, that would increase liquidity coverage to about $3.8 billion, or roughly 26 months of obligations before repurchases, taxes, or transaction costs, according to Strategy’s press release. Strategy previously sold 32 BTC for $2.5 million to help fund dividend repayments.
STRC Dividend Rises As Shares React
Strategy raised the annual dividend on STRC preferred stock to 12%, effective July 1. Before the increase, STRC had gone through seven rate hikes, moving from 9% to 11.5%. STRC closed Friday near $74.57, a discount of about 25%.
“Digital Credit requires liquidity, discipline, and active capital management,” Saylor said. He added that the framework is “designed to strengthen credit quality and enable the Company to reduce expected preferred stock dividend payments when accretive.”
CEO Phong Le said Strategy is shifting from a capital issuance model to active capital structure management through issuance and repurchases. After the announcement, MSTR rose 6% in pre-market trading, STRC gained about 9%, and Bitcoin moved modestly higher near $60,500.
Investors will closely track quarterly disclosures for Bitcoin sales, reserve changes, and repurchase activity.
