MSTR's latest repurchase plan: selling coins, buying stocks? What does this mean? Let's first take a look at their 8-k last week. Last week, they sold another 1.1 billion yuan worth of common stock against an mNAV (important cut-off point) close to 1. But I haven't bought a single BTC. All the money raised has been added to their cash reserves. Now they have a cash reserve of 2.55 billion US dollars. After selling stocks, I didn't buy coins and used them all to hoard cash. It can be said that this is a very defensive move and a response to the FUD of MSTR and STRC in the market this week. --------------- More importantly, Saylor officially gave a thumbs up to 'We're going to sell coins'. Officially launched the BTC Monetization Program - BTC Money Exchange Program? It's a coin selling plan - selling BTC and using the money from selling BTC to repurchase one's own common stock. Why are we doing this now? First, understand the problem it aims to solve The gameplay of micro strategy in recent years is to issue various preferred stocks (STRC/STRF/STRD/STRK) and common stocks (MSTR) to buy BTC. Common stocks have no financing costs, but are subject to mNAV restrictions. Selling common stocks to buy coins is only cost-effective for shareholders when mNAV>1. And preferred stock dividends are very high, plus other debt interest, which now requires a fixed annual payment of about $1.76 billion. The question is: Where does this 1.7 billion interest come from? The past answer was to continue issuing common stocks and preferred stocks, and to repay the old with new ones. But recently, this system has encountered serious problems. Originally designed to dynamically adjust dividends, the STRC anchored around 100 has been severely detached from 100 for more than a week (around 75 on Friday, it just returned to 80 before trading) At the same time, the mNAV of MSTR's stock price is also approaching the critical value of<1. It means that both financing channels are simultaneously broken. That's why there has been a sustained FUD of MSTR in the market over the past two weeks. And today's coin selling plan is essentially an insurance for the previous financing flywheel. ---------------- In their new plan, they can sell up to 1.25 billion BTC when they deem it necessary. (The current maximum allowed limit, more may need to be approved in the future) These funds can be used to replenish their cash reserves (to pay interest) and to repurchase their preferred shares (such as STRC) and common shares. It's like dragging a bottom for STRC: I used a face value of 100 to sell STRC and buy BTC If STRC remains below 100 for a long time, such as 80 I can completely sell BTC to repurchase 80 STRC So this has become a new wheel: if the stock is worth money, I will continue to sell stocks and buy coins. When the stock falls to the floor price and the coin becomes more valuable, I sell the coin to repurchase the stock. ----------- This set of tactics is equivalent to their current US dollar reserves (2.55 billion) and BTC monetization limit (1.25 billion), totaling 3.8 billion US dollars that can be used. Based on the current annual interest expense of 1.7 billion, it can cover approximately 26 months without any cash flow issues. (Assuming that there is no way to raise new money in these 26 months) ---------------- What does this mean for the entire market and cryptocurrency community? Firstly, the sign of never selling coins has been completely rewritten. If the hundreds sold before were just testing the market. So the official launch of this coin selling project means that MSTR has officially opened the door to coin selling. They have always established their brand on never selling coins (although there have been various changes recently). So now officially authorizing a coin selling plan, although the wording is very cautious, they emphasized in the announcement that "selling is not mandatory" and "approval from the board of directors is required", but this is still a major shift in the company's philosophy. Their narrative has changed, from BTC being an unused reserve asset to an asset that can be actively managed. Secondly, their cash flow has become healthier. With a cash buffer, one can sell coins and use various means of financing. It's not just about financing to borrow new and fill in old. Responding to some concerns about the collapse of MSTR. It can be considered a more robust capital management. Thirdly, we need to focus more on the long-term value of STRC in the future. If STRC still cannot recover to 100 in the long run and their cash reserves start to decrease again (such as<1 billion?), be careful that they will start selling coins. ----------- The final conclusion is that both long and short positions can have their own understanding of their announcement today. On the positive side, the risk of a complete collapse of MSTR in this round (recently) has decreased again. To put it worse, the MSTR that always buys coins is no longer there. They raised the interest rate of STRC to 12% today, and STRC has also rebounded from 73 on Friday to around 80. Let's see if the market agrees or not.