Introduction
Strategy has acquired 168 Bitcoin worth $18.8 million in its third smallest purchase this year, marking a significant shift in funding strategy by utilizing preferred shares instead of common stock issuance. The Tysons Corner, Virginia-based firm continues to accumulate Bitcoin despite recent price volatility, maintaining its massive treasury of approximately 640,400 Bitcoin valued at $71 billion while its stock shows signs of recovery following the announcement.
Key Points
- Strategy paid an average of $112,000 per Bitcoin despite recent price drops, showing commitment to accumulation strategy
- The company's mNAV premium has fallen from 1.32x to 1.21x since September, suggesting reduced arbitrage opportunities
- Strategy modified its common share issuance policy earlier this year to convey discipline and gain flexibility in funding approaches
A Shift in Funding Strategy
Strategy’s latest Bitcoin acquisition represents a notable departure from its historical funding approach. The company disclosed spending $18.8 million on 168 Bitcoin last week, funded exclusively through proceeds from preferred shares rather than common stock issuance. This marks the third smallest Bitcoin purchase of the year for the firm and continues a pattern of reduced acquisition activity, with only 387 Bitcoin purchased so far this month – putting Strategy on pace for a 94% sequential decrease from September’s 7,574 Bitcoin purchase.
The move away from common share issuance represents a strategic shift for the Bitcoin-buying firm. Historically, Strategy has issued common shares to fund its Bitcoin purchases, particularly when its stock trades at a premium relative to its Bitcoin holdings. This arbitrage strategy allowed the company to grow the amount of Bitcoin owned per share. However, Strategy hasn’t issued any common shares this month, instead tapping preferred shares introduced earlier this year, which sometimes entail dividend payments.
Market Context and Performance Metrics
The acquisition comes amid mixed market conditions for both Strategy’s stock and Bitcoin itself. Strategy paid an average cost of $112,000 per Bitcoin last week, despite Bitcoin’s price falling 3.4% to $111,250 over the past seven days. The digital asset showed signs of rebounding on Monday, coinciding with Strategy’s announcement. Meanwhile, Strategy shares rose 5.3% to $305 following the news, lifting the stock into positive territory for the year despite an 11.5% decline over the past month.
Key metrics indicate changing dynamics in Strategy’s funding strategy effectiveness. The firm traded at a 1.21x premium to its Bitcoin holdings on Monday, according to Bitcoin Treasuries, which tracks mNAV (multiple-to-net asset value). This represents a decline from the 1.32x premium seen in late September, suggesting that the funding mechanism has grown less lucrative even as it’s gone untapped. The mNAV metric has emerged as an informal yet popular standard for assessing Bitcoin treasury firms.
Strategic Implications and Market Sentiment
Strategy’s policy adjustments earlier this year appear to be driving these changes in funding approach. The company modified its common share issuance policy to convey discipline and gain greater flexibility in its funding approaches. While this provides the firm with more options, market onlookers have suggested that it could make Strategy’s moves less predictable moving forward. The company has refrained from issuing common shares over the past few weeks despite the changing premium environment.
Market sentiment toward Strategy’s Bitcoin strategy remains largely positive, with more than nine in ten respondents to a Myriad market survey believing that the company will not sell Bitcoin. This confidence in Strategy’s commitment to accumulation aligns with Executive Chairman Michael Saylor’s recent social media statement referencing ‘the most important orange dot is always the next,’ indicating continued focus on future Bitcoin purchases. The company’s massive Bitcoin stockpile of roughly 640,400 Bitcoin, recently worth $71 billion based on current prices, underscores its position as a major institutional holder in the cryptocurrency space.
📎 Related coverage from: decrypt.co