Strategy adopted a new Digital Credit Capital Framework on Monday that authorizes the company to sell bitcoin to fund stock buybacks — a reversal of the approach it has followed since designating bitcoin its primary treasury reserve asset.
Two separate repurchase authorizations sit at the center of the framework: one covering up to $1 billion in preferred securities and another covering the same amount in class A common stock
A bitcoin monetization program is also part of the package, giving management discretion to sell bitcoin and direct the proceeds toward any combination of reserve building, dividend and interest obligations, or the repurchase programs. Neither the repurchase authorizations nor the bitcoin monetization program carries any requirement to transact. “Strategy is evolving from one-way capital issuance to active capital management,” CEO Phong Le said in a statement. The CEO described the company’s new posture as one of two-way flexibility — putting capital out when conditions favor issuance and pulling it back when buybacks create value.
The board authorized bitcoin sales of up to $1.25 billion to build the USD reserve. Adding that potential $1.25 billion to the $2.55 billion already on hand as of June 28 would bring total liquidity available to cover preferred dividends and interest to approximately $3.8 billion — enough to absorb nearly 26 months of the company’s roughly $1.76 billion in annual obligations. Going forward, board policy will require the reserve to cover no less than a year’s worth of dividend and interest expense at any given time.