Strategy Boosts Cash to $2.19bn, Fortifying Bitcoin Bet Through Crypto Winter

• Strategy raised its cash reserves to $2.19 billion by selling shares to ensure it can cover nearly three years of debt and dividend payments.
• This cash buffer protects the company from needing to raise capital during crypto market downturns while it maintains its massive bitcoin holdings.
• TD Securities maintained a $500 price target and a buy rating based on the stock’s tendency to trade at a premium relative to its Bitcoin assets.

Strategy (formerly MicroStrategy) said Monday it has lifted its US dollar cash reserve to US$2.19 billion (AU$3.3 billion). 

The firm said the cash came from selling common shares and raising about US$748 million (AU$1.14 billion).

TD Cowen’s TD Securities said the cash pile is big enough to cover Strategy’s interest (payments on debt) and preferred dividends (regular payments promised to preferred shareholders) for about 32 months. So, in other words, the company has nearly three years of scheduled payments covered.

This makes sense given that Strategy is closely tied to BTC, so when Bitcoin markets are weak, raising new money can get harder and more expensive, whereas holding more cash reduces the risk that the company is forced to raise money at a bad time.

Read more: JPMorgan: Stablecoin Boom Tied to Crypto Reality, Not Trillion-Dollar Dreams

Shares Target Remains The Same

TD Securities kept a buy rating (an analyst recommendation to buy the stock) and a 12-month price target of US$500 (AU$765). The shares were around US$165 (AU$252) at the time of writing and were down more than 43% year-to-date.

Source: Google Finance.

The bank said its high target is based on how Strategy’s stock can move more than Bitcoin. That’s because the company acts like a “Bitcoin holding vehicle” in public markets, and its share price can trade above or below the value of its BTC. That gap is often called a premium (when the stock is priced above the Bitcoin value it represents).

Strategy first described this cash-buffer plan in early December, saying it had raised US$1.44 billion (AU$2,203,200,000) to support those payments. 

Strategy is the largest corporate Bitcoin holder, with 671,268 BTC worth more than US$59 billion (AU$90,270,000,000). The company added US$980 million (AU$1.4 billion) in Bitcoin last week.

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