Strategy buys US$81.9M in bitcoin using common-share sales
The company raised US$283.8 million through common shares and spent more on preferred repurchases than on its bitcoin purchase.
Julian Okafor
Common-share sales funded a US$81.9 million bitcoin purchase while a larger sum went to buying back preferred shares. Strategy Inc NASDAQMSTR NASDAQSTRC, the Virginia-based bitcoin treasury company, reported on Monday that it bought 1,036 bitcoin during Nov. 2-8.
The acquisition brought holdings to 850,364 bitcoin as of Nov. 8, according to its Nov. 9 securities filing. Strategy reported an aggregate purchase cost of US$64.16 billion for that treasury, including fees and expenses.
The company sold 2,051,348 common shares for US$283.8 million in net proceeds during the reporting period. It directed US$188.3 million to repurchasing its variable-rate Stretch preferred shares, alongside the bitcoin purchase and an allocation to cash.
Common shares closed at US$128.93, down 0.29 per cent, on Nasdaq on Nov. 6 at 4 p.m. EST, according to NASDAQMSTR. That close preceded the purchase disclosure; the next Stretch payout is scheduled for Nov. 10.
Common Shares Fund Preferred Repurchases
Strategy paid an average US$79,012 per bitcoin during Nov. 2-8, including fees and expenses. Its average acquisition cost across the entire treasury was US$75,456 per bitcoin as of Nov. 8, leaving the newest purchases above its historical average.
"The bitcoin purchases were made using net proceeds from MSTR Stock sales," Strategy said in the Nov. 9 filing.
Strategy repurchased 1,887,464 Stretch preferred shares during Nov. 2-8, spending more on those repurchases than on the additional bitcoin.
Stretch preferred shares closed at US$99.84, up 0.38 per cent, on Nasdaq on Nov. 6 at 4 p.m. EST, according to NASDAQSTRC. That market price is separate from the filing's aggregate repurchase expenditure and does not identify the prices paid on individual transactions.
Strategy reported no sales under its four preferred-share at-the-market programs during Nov. 2-8. The common-share sales figure includes transactions not yet settled as of Nov. 6, and net proceeds are stated after sales commissions.
As of Nov. 8, US$18,337.3 million remained available for issuance and sale under the common-share program. That unused capacity represents potential further issuance, rather than money already raised or a commitment to purchase bitcoin.
Strategy's Nov. 9 bitcoin ledger listed assumed diluted shares outstanding at 455.163 million, compared with 453.112 million in its Nov. 2 entry. That measure extends beyond issued common shares.
The company's calculation methodology includes assumed conversion of convertible securities and potential shares from equity awards. A larger bitcoin total therefore cannot, by itself, establish an increase in bitcoin exposure per assumed diluted share.
Dollar Reserves Have Separate Uses
Strategy allocated another US$13.6 million of the Nov. 2-8 common-share proceeds to its USD Cash balance. Together, the bitcoin purchase, preferred repurchases and cash allocation account for the reported net proceeds.
The company distinguished US$4.77 billion in its USD Reserve from US$146.2 million in USD Cash as of Nov. 8. The reserve is intended to support preferred dividends and interest on outstanding debt; management maintains USD Cash for broader treasury purposes, including possible bitcoin acquisitions.
During Nov. 2-8, Strategy used US$21.1 million from the reserve to pay preferred dividends. The purchase announcement therefore combines a larger bitcoin position with cash distributions to preferred holders and an expansion of the common-share count.
Strategy also reported US$560.3 million remaining under its preferred-securities repurchase program as of the Nov. 9 update. Its separate common-share repurchase program retained US$1 billion of capacity, but the company reported no common-share repurchases during Nov. 2-8.
Strive Also Uses Preferred Financing
Strive, Inc. NASDAQASST, the Dallas-based bitcoin treasury and asset-management company, reported approximately US$609 million in net proceeds from an October preferred offering in its Nov. 6 results. That offering closed on Oct. 20, after the September reporting period.
Strive also disclosed a US$50.1 million fair-value position in Strategy's Stretch preferred shares as of Oct. 30. Its exposure therefore extends beyond holding bitcoin directly to owning a preferred security that Strategy was repurchasing during Nov. 2-8.
Mugglehead's earlier examination of Strive's preferred financing traced the distinction between reported liabilities and preferred equity. Strive's Sept. 30 accounts carried US$1.21 billion of preferred stock separately as mezzanine equity.
Read more: Strive reports US$285.4M cash as preferred financing expands
The next dated cash-distribution checkpoint is Nov. 10, the payout date on Strategy's Stretch preferred-share dashboard, which lists Nov. 9 as the record date. That payment follows the Nov. 2-8 period in which Strategy both paid preferred dividends and bought back preferred shares.
