Lightning Five连鞭! Strategy self-rescue plan officially released.

Original | Odaily Planet Daily (@OdailyChina)

Author｜Azuma (@azuma_eth)

Deeply trapped in the STRC depegging crisis, Strategy has finally announced its self-rescue plan.

On the evening of June 29, Beijing time, Strategy officially released a new plan titled "Digital Credit Capital Framework," aimed at enhancing the credit quality of various preferred shares under the company (clearly referring to STRC), improving liquidity, and creating long-term value for shareholders while maintaining a long-term Bitcoin exposure.

According to Strategy's disclosure, the framework is divided into five main parts as follows:

Cash reserve status;
STRC dividend policy;
Preferred stock buyback plan;
Common stock buyback plan;
Bitcoin monetization plan.

In the following text, Odaily Planet Daily will analyze each of the five components of this plan (Odaily note: Recommended reading " STRC depegged 11%, can Strategy's perpetual motion machine still operate? "; " STRC won't re-peg, BTC won't have a bull market ").

Cash Reserves: Two Years of Dividends Pre-saved

In this announcement, Strategy first disclosed the company's cash reserve status.

As of June 28, Strategy had approximately $2.55 billion in USD reserves, which includes some funds raised from ATM issuance that have not yet been settled.

The key point is that, for the first time, Strategy has institutionalized the management of this cash. Under a new policy approved by the board, these USD reserves can only be used for two purposes: first, to pay dividends on the preferred shares (mainly STRC); second, to pay interest on the company's existing debt, and any other use must be re-approved by the board.

Based on Strategy's current annual preferred share dividends and debt interest expenses of about $1.76 billion, the $2.55 billion cash is sufficient to cover about 17.4 months. At the same time, the company has set a hard bottom line: the future USD reserves must not fall below the projected dividends and interest expenses for the next 12 months; otherwise, board approval is also required.

In addition, Strategy will also include the approved $1.25 billion BTC monetization quota (detailed in the fifth part below) in its liquidity assurance system. Combined, the company currently has approximately $3.8 billion in usable liquidity, enough to cover about 25.9 months of preferred share dividends and debt interest expenses.

Essentially, this is Strategy responding positively to the market's greatest concern over the past period — "Can cash reserves cover STRC's dividend payment obligations?"

Strategy's funding source relies heavily on continuous financing. Once the issuance of common stock, preferred stock, or convertible bonds is blocked, the market will begin to worry about whether the company can continue to fulfill its high dividend payments, which is one of the important reasons for STRC's continuous depegging. The current situation can be understood as Strategy preemptively reserving the next two years of dividends and promising that this funding will not be used for other purposes. For STRC holders, this adds a cushion independent of financing markets and helps alleviate market concerns about the company's short-term solvency.

Dividend Policy: Raised to 12%, but Depegging Does Not Mean Rate Increase

Another key piece of information in this announcement is the adjustment of the STRC dividend policy.

Strategy announced that starting from July 1, the annualized dividend rate for STRC will be raised from its previous level to 12%. In the future, Strategy will evaluate the dividend rate for STRC monthly, considering various factors including STRC's market price, market yield, credit spreads, BTC price and volatility, cash reserve coverage level, capital market environment, and overall capital structure.

However, Strategy also emphasized that even if STRC drops below $100, the company may not necessarily increase the dividend. Adjusting the dividend is just one of many capital management tools, and the company can also stabilize the market through cash reserve management, BTC monetization, preferred stock buybacks, and common stock buybacks; thus, it will not simply treat "depegging = rate increase" as a fixed formula.

Preferred Stock Buyback: Up to $1 Billion, Priority Given to STRC

The most critical information has arrived! If the first two measures of Strategy are still enhancing STRC's attractiveness through market mechanisms, then the third measure is Strategy's first formal tool for directly intervening in secondary market prices.

According to the announcement, Strategy has approved a buyback plan for digital credit securities (i.e., preferred shares) of up to $1 billion, covering four preferred share products: STRC, STRF, STRD, and STRK. Strategy also stated that if management believes the buyback has value-added effects and helps improve the capital structure, STRC will be a priority buyback object.

For Strategy, this approach offers at least three benefits:

First, buying back discounted preferred shares is a cost-effective transaction. For example, when STRC trades at $90, the company only needs to spend $90 million to cancel $100 million in nominal preferred shares, which directly reduces the principal scale of future dividend payments.
Second, as the number of circulating preferred shares decreases, the company's future annual dividend payments will also decline, further easing cash flow pressure and improving overall credit quality.
Most importantly, when the company becomes an actual buyer in the market, it also sends a clear signal to the market — Strategy will not allow its digital credit products to trade at significant discounts for an extended period.

Of course, this authorization does not mean that the company will immediately initiate the buyback. Strategy emphasized that the $1 billion is merely the maximum authorized amount granted by the board to the management, with no fixed execution deadline and no minimum execution amount required. Whether to actually implement the buyback will still depend on market prices, liquidity, and management’s judgment on capital allocation efficiency.

Additionally, there is a detail worth noting. Strategy clearly states that the preferred stock buyback will not use USD reserve funds; if BTC needs to be sold for buyback financing in the future, it must be completed through the BTC monetization plan mentioned later. This means that Strategy deliberately isolates the two funding uses of "ensuring dividend payments" and "buying back securities," avoiding market concerns that the company would affect preferred stockholders' payment security to facilitate buybacks.

Common Stock Buyback: Also Up to $1 Billion, Calming Shareholders

In addition to preferred stock, Strategy has also launched a common stock (MSTR) buyback plan of up to $1 billion.

Similar to the preferred stock, this authorization allows the company to buy back MSTR shares through various methods based on market conditions, including open market, block trades, privately negotiated transactions, and accelerated buybacks (ASR). However, the target of the common stock buyback is more direct — when management believes MSTR's stock price is below its intrinsic value, it aims to create long-term value for common stock shareholders.

This is actually a very mature capital allocation idea in capital markets. In the past, Strategy has almost always played the role of a stock issuer. Since MSTR has long enjoyed a valuation premium far above its net asset value (mNAV), the company has continuously raised common stock through ATM, converting high valuations into cash to reinvest in Bitcoin.

However, this logic does not hold forever. Strategy has explicitly stated in the announcement that the company will maintain discipline in raising common stock in the future, especially when MSTR's mNAV approaches 1 times, and will be more cautious in issuing common stock. This means that when the stock has a high premium, the company can continue to issue stock for financing; while when the premium narrows, or even when the market undervalues the company's worth, it can shift to buy back stock — in other words, Strategy hopes to establish a bi-directional capital management mechanism, raising capital when overvalued and buying back when undervalued.

Of course, like the preferred stock buyback, this $1 billion authorization is merely to give management more operational space and does not mean that Strategy will necessarily initiate a buyback immediately. At the same time, Strategy also clearly states that the common stock buyback will not use USD reserve funds; if BTC needs to be sold for buyback financing in the future, it must also be incorporated into the unified management of the BTC monetization plan.

Bitcoin Monetization Plan: Just Selling Coins

Clearly, this is the most controversial part of the announcement — if called nicely, it's "monetization," but frankly, it's just "selling coins."

According to the announcement, the board officially approved a BTC Monetization Program, authorizing the company to sell part of its BTC, primarily for three types of purposes:

First, to establish up to $1.25 billion in USD reserves;
Second, when management believes that selling BTC is more cost-effective than issuing common stock, for paying preferred stock dividends and debt interest or to supplement USD reserves;
Third, to provide funds for preferred stock and common stock buybacks, including related taxes and transaction costs.

Strategy also emphasized that this authorization does not mean that BTC will necessarily be sold; selling will still be considered comprehensively based on market conditions, liquidity needs, tax and accounting impacts, and long-term shareholder value.

Regardless, this is a change worth noting. In the past few years, Michael Saylor emphasized Strategy's long-term holding philosophy, and the market generally viewed it as the ultimate whale that "only buys and never sells." As a result, the outside world long assumed that Strategy's source of cash was only one — continuously issuing stock, preferred stock, and convertible bonds, and then using the raised funds to continue buying BTC.

Earlier this month, Strategy first sold a small amount of its BTC holdings, only 32 coins, officially stating that this was to "actively conduct market desensitization testing," but this announcement indicates that selling BTC has been officially included as a tool in the company's capital management toolbox.

However, Strategy still emphasized Bitcoin's position as a "core reserve asset," with Bitcoin monetization being more of a liquidity management tool rather than a trading strategy. In other words, the company is not preparing to profit from high and low price differentials by trading but is increasing a new source of funds when financing costs are too high, market conditions are unfavorable, or buybacks and cash reserve supplements are more cost-effective.

From a capital allocation perspective, this choice may not be a bad thing, and could even be more rational. Of course, for the market, this change also means an adjustment to a long-held perception — in the past, investors almost assumed that Strategy would continue to buy BTC, making it one of the most important marginal buyers in the Bitcoin market; while in the future, although the company will still focus on holding BTC long-term, the BTC on the balance sheet will no longer be just "a reserve asset that will never be sold," but will become a strategic asset that can participate in capital management under specific conditions.

Market Reaction: BTC Stable as a Rock, MSTR, STRC Rise on the Spot

After the announcement of Strategy's plan, BTC did not exhibit significant fluctuations, briefly rising then quickly returning to previous levels, currently oscillating around $60,000.

For Strategy, its common stock MSTR and preferred stock STRC saw significant pre-market rises. As of 21:00 tonight, MTSR is reported at $86.74 in pre-market, a rise of 5.38%; STRC is reported at $80.9 in pre-market, a rise of 8.49%.

Clearly, the market holds a relatively positive expectation for Strategy's self-rescue plan. Although confirming to sell more BTC will undoubtedly attract controversy, the current depegging of STRC and its impact on Strategy's business model is evidently a more urgent issue and more important than maintaining the "diamond hands" persona.

Moving forward, whether this capital management framework can truly help STRC return to par and reopen Strategy's financing cycle will be the true focus of the market.

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