Strategy maintains weekly purchase streak with day-late announcement

Strategy announced its routine weekly purchase a day later on Tuesday, leaving the market guessing for 24 hours. However, Strategy is back to making bigger tranches of BTC purchases to its reserves after several smaller buys. 

Strategy kept stacking despite the unusually late announcement of the last BTC purchase. The company acquired 4,048 BTC for the period of August 26 to September 1. The relatively larger amount of BTC follows a few weeks where the firm showed weakness in its fundraising and shifted its rules on using new MSTR common stock issues to acquire BTC and cover operational costs. 

The announcement followed the usual social media message from the company’s executive chairman Michael Saylor on Tuesday. This week’s delay followed Strategy’s waiting period for a decision on being included in the S&P 500 index. Strategy showed readiness to fulfill all requirements for a S&P 500 company, though the new round of announcements will be on September 5. 

Strategy’s financing hinged on STRK, STRD, and MSTR

To fulfill its latest BTC purchase, Strategy issued MSTR common stock, as well as STRK and STRD preferred shares. This time, STRC and STRF facilities skipped a week. 

$425.3M came from MSTR issuance, as the company’s portfolio and BTC price fulfilled the conditions for adding more common stock. Only $20M came from STRK and STRD, and without the common stock issue, Strategy would have another week with a minimal BTC purchase. 

The big MSTR issuance follows the decision to still sell common stock even at a lower ratio of net asset value. Previously, Strategy did not print new MSTR tranches at a mNAV ratio under 2.5. The current move may increase common stock dilution, though for now, the company still coasts on its returns since it adopted its BTC treasury in 2020.

The average price of Strategy is still at $73,765 per BTC, a relatively low average for a treasury company. The current BTC drawdown to $107,000 still gives the company significant leeway for long-term holding. 

MSTR issue follows new rule on net asset value ratio

Following the latest purchase, MSTR traded at $331.17. Based on the new rules, at this price range, the company has a mNAV ratio of around 1.58. 

At this price range, roughly under $600 per MSTR, the common stock will still be issued, but will be used to pay interest on debt obligations and pay out dividend to preferred stock holders. The company has reported a 10% loss of value for the past three months based on its investments, but the yearly return is still at 152%. The company’s debts are at 12% of the BTC holdings at the current price.

During the latest purchase period, MSTR was also outside the top 20 most active US stocks. The recent addition of 1,237,000 MSTR once again raised concerns of using stock buyers as a source of liquidity. The only chance at improved mNAV would be a BTC rally from external factors, as the Strategy buying alone has a more limited effect on BTC recovery.

Despite skepticism about Strategy, BTC buying continues for smaller treasuries. Metaplanet tries to stay in the spotlight with international fundraising and a growing treasury of 20K BTC. 

In the past week, the cutoff treasury to enter the top 100 BTC reserves rose from 55 BTC to 77 BTC, following a series of small-scale routine purchases and bigger weekly expansions.

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