Strategy (Nasdaq: MSTR) has revealed that it could use a portion of its bitcoin reserve to fund dividend payments if its stock were to trade below one-times modified net asset value. The company clarified that this option would apply only under stressed valuation conditions and is not part of its routine capital plan.

Noting that the move would be a last resort, Phong Le, Strategy’s chief executive officer, said on a podcast on Friday:

We can sell bitcoin and we would sell bitcoin if we needed to fund our dividend payments below 1x mNAV.

He added: “There’s the mathematical side of me that says that would be absolutely the right thing to do, and there’s the emotional side of me, the market side of me, that says we don’t really want to be the company that’s selling bitcoin. Generally speaking, for me, the mathematical side wins.”

The firm’s mNAV sat at 1.17 on Dec. 2, according to its website, heightening fears it could approach parity or dip below 1. A break under that level would mean the market is valuing the company beneath the worth of its bitcoin, raising the risk that dividend funding could require additional liquidity. This valuation metric compares enterprise value with the market value of the company’s bitcoin reserve. Premium conditions appear above 1, parity at 1, and discounts below 1, with the latter signalling pressure on its balance sheet strategy. If operating cash and reserves were insufficient during a downturn, selling bitcoin would defend shareholder payouts without abandoning its long-term accumulation thesis.

Read more: Strategy Flexes Hard With Fresh 130 BTC Grab and $1.44B War Chest

Michael Saylor, Strategy’s executive chairman, has maintained an aggressive, almost absolute “never sell” stance on the company’s bitcoin holdings. Amid market volatility, his focus has been on avoiding the sale of BTC and using other financing methods to cover the company’s financial obligations. Following Le’s discussion of a potential worst-case scenario that could necessitate selling bitcoin, Strategy announced the establishment of a $1.44 billion USD cash reserve. Saylor commented on this move, stating:

Establishing a USD Reserve to complement our BTC Reserve marks the next step in our evolution, and we believe it will better position us to navigate short-term market volatility while delivering on our vision of being the world’s leading issuer of Digital Credit.

• Why is Strategy considering selling bitcoin?
  To maintain dividend payments if mNAV falls below 1x and available liquidity becomes insufficient.
• What is causing pressure on Strategy’s mNAV?
  Declining bitcoin prices are pushing the valuation metric closer to parity and potential discount territory.
• What happens if mNAV drops below 1?
  The market would value Strategy below the worth of its bitcoin holdings, increasing liquidity risk for dividend coverage.
• How does bitcoin function in Strategy’s balance sheet plan?
  It acts as both a long-term reserve asset and a potential liquidity backstop during market downturns.

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