Arkham, a platform specializing in cryptocurrency analytics, has released an insightful evaluation regarding Michael Saylor’s Bitcoin holdings as co-founder of Strategy.
The report reveals that Saylor is currently facing a loss exceeding 10% relative to his average acquisition price. However, the pressing issue is whether this downturn will compel Strategy to liquidate its Bitcoin assets.
Examining the company’s financial structure, two primary funding sources emerge: preferred stock and convertible bonds. Strategy holds roughly $2.55 billion in cash reserves intended to cover these liabilities. The preferred shares include several series identified by tickers such as STRK, STRF, STRD, STRC, and STRE. These shares typically yield dividends between 8% and 10%, but these payments are discretionary rather than obligatory—meaning if cash flow tightens, the company can opt not to distribute dividends without needing to sell Bitcoin. Additionally, decisions about share repurchases rest solely with management.
The most significant binding commitment involves convertible bonds amounting to approximately $8 billion in debt. These instruments must either be redeemed upon maturity or converted into equity at predetermined prices. Although Strategy’s current cash reserves of $2.5 billion fall short of covering this entire debt load outright, it does not necessarily imply an immediate sale of Bitcoin holdings.
Arkham outlines that one possible outcome is bondholders choosing conversion rights: if the market price of Strategy’s shares exceeds the conversion threshold when bonds mature—as was already applicable for bonds maturing in 2027—investors may convert their debt into stock instead of demanding repayment in cash. Should share prices dip below this level at maturity, refinancing options come into play including issuing new equity shares or additional convertible securities or preferred stocks.
If all refinancing avenues prove unfeasible, then selling part of its Bitcoin portfolio might become necessary for meeting bond obligations; however this decision heavily depends on prevailing Bitcoin market values and how effectively the company can attract capital from investors at that time. Thus risk exposure hinges more on Saylor’s capacity for flexible financing arrangements rather than simply his average purchase cost per coin.
Furthermore Arkham highlights a crucial nuance: previous strategies employed by Saylor involving selling common stock to acquire more Bitcoins do not impose mandatory future cash outflows on Strategy itself; hence stating “Saylor is losing money” does not automatically translate into forced liquidation scenarios for their crypto assets.
The key metric remains whether Strategy can successfully refinance or roll over its outstanding convertible debts despite fluctuations below average cost levels over extended periods.
*This content should not be considered financial advice.*