Strategy Unveils 5-Point Plan to Stabilize STRC and Boost Liquidity

Original | Odaily Planet Daily (@OdailyChina)

Author | Azuma (@azuma_eth)

Strategy, which has been deeply entangled in the STRC depeg crisis, has finally announced its rescue plan.

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

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

• Cash reserve status;
• STRC dividend policy;
• Preferred stock repurchase program;
• Common stock repurchase program;
• Bitcoin cash-out plan.

In the following text, Odaily Planet Daily breaks down the five key components of the plan （Odaily note: We recommend reading 《STRC Detaches by 11%, Can Strategy’s Perpetual Motion Machine Still Turn?》；《If STRC Doesn’t Re-anchor, BTC Won’t See a Bull Market》）.

In this announcement, Strategy first disclosed its cash reserve position.

As of June 28, Strategy had approximately $2.55 billion in USD reserves, including a portion of ATM issuance proceeds not yet settled.

The key point is that Strategy has institutionalized the management of this cash for the first time. Under the new policy approved by the board, this dollar reserve may now be used solely for two purposes: paying dividends on its preferred shares (primarily STRC) and paying interest on the company’s existing debt. Any other use requires further board approval.

Based on the current annual preferred dividend and interest payments of approximately $1.76 billion, $2.55 billion in cash is sufficient to cover approximately 17.4 months. Meanwhile, the company has established a strict floor: future dollar reserves must not fall below the projected dividend and interest payments for the next 12 months, otherwise similar board approval is required.

In addition, the Strategy incorporates the approved $1.25 billion BTC cash-out limit (detailed in Section 5 below) into the liquidity assurance framework. Combined, the company currently has approximately $3.8 billion in available liquidity, sufficient to cover approximately 25.9 months of preferred dividend and debt interest payments.

Essentially, this is Strategy directly addressing the market’s biggest concern over the past period—“whether cash reserves can cover STRC’s dividend payment obligations.”

The funding source for Strategy's strategy heavily relies on continuous financing; if the issuance of common stock, preferred stock, or convertible bonds faces obstacles, the market begins to worry whether the company can continue to honor its high dividends, which is one of the key reasons STRC has remained disconnected. The current situation can be understood as Strategy having "pre-deposited" dividends for the next two years and pledging that these funds will not be diverted for other purposes. For STRC holders, this acts as an independent safety net separate from the financing market and helps alleviate concerns about the company's short-term solvency.

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

Strategy announced that, effective July 1, the annualized dividend yield for STRC will be increased from its previous level to 12%. Going forward, Strategy will evaluate the STRC dividend yield on a monthly basis, considering factors such as STRC’s market price, market yields, credit spreads, BTC price and volatility, cash reserve coverage levels, capital market conditions, and overall capital structure.

However, this time Strategy specifically “added extra armor,” emphasizing that even if STRC falls below $100, the company may not increase its dividend. Adjusting the dividend is just one of many capital management tools; the company can also stabilize the market through cash reserve management, BTC liquidation, preferred share buybacks, and common share buybacks, so it will not treat “de-anchoring = dividend increase” as a fixed formula.

The most critical information is here! If the first two measures of Strategy were still about enhancing STRC’s appeal through market mechanisms, then the third measure marks the first time Strategy has officially introduced a tool to directly intervene in the secondary market price.

According to the announcement, Strategy has approved a digital credit securities (preferred shares) repurchase program of up to $1 billion covering the four preferred share products: STRC, STRF, STRD, and STRK. Strategy also explicitly stated that if management determines that repurchases add value and improve the capital structure, STRC will be the priority for repurchase.

For a Strategy, doing so offers at least three benefits:

• First, repurchasing discounted preferred shares is itself a favorable transaction. For example, when STRC trades at $90, the company can retire $100 million in par value preferred shares by spending only $90 million, directly reducing the principal amount subject to future dividend payments.
• Second, as the number of outstanding preferred shares decreases, the company’s annual dividend payments will also decline, further alleviating cash flow pressure and improving overall credit quality.
• More importantly, when the company becomes an actual buyer in the market, it also sends a clear signal that Strategy will not allow its digital credit products to trade at significant discounts for extended periods.

Of course, this authorization does not mean the company will immediately initiate a buyback. Strategy specifically emphasizes that the $1 billion represents the maximum authorization granted by the board to management, with no fixed execution timeline or minimum execution amount. Whether a buyback is actually carried out will depend on market prices, liquidity, and management’s assessment of capital allocation efficiency.

Additionally, there is another detail worth noting. Strategy explicitly states that preferred share repurchases will not use U.S. dollar reserves; if BTC sales are required to fund repurchases in the future, they must be conducted solely through the BTC monetization plan mentioned below. This means Strategy deliberately separates the use of funds for “ensuring dividend payments” from those for “repurchasing securities,” to avoid market concerns that the company might compromise the repayment security of preferred shareholders in order to finance repurchases.

In addition to preferred shares, Strategy is also simultaneously launching a common stock (MSTR) repurchase program of up to $1 billion.

Similar to preferred stock, this authorization allows the company to repurchase MSTR shares through various methods, including open market purchases, block trades, privately negotiated transactions, and accelerated share repurchases (ASRs), depending on market conditions. However, unlike preferred stock repurchases, which primarily aim to stabilize the digital credit system, the goal of common stock repurchases is more direct—to create long-term value for common shareholders when management believes the MSTR stock price is below its intrinsic value.

This is also a very mature capital allocation strategy in the capital markets. Historically, Strategy has almost always acted as a stock issuer. Due to MSTR’s long-standing valuation premium significantly above its net asset value (mNAV), the company has consistently used ATM offerings to issue additional common shares, converting its high valuation into cash to continue purchasing bitcoin.

But this logic does not always hold. Strategy explicitly stated in its announcement that, in the future, the company will maintain discipline in common stock financing, particularly exercising greater caution in issuing common stock when MSTR’s mNAV approaches 1x. This means that when the stock trades at a significant premium, the company can continue raising capital through equity issuance; but when the premium narrows—or the market undervalues the company—it can shift to repurchasing shares. In other words, Strategy aims to establish a two-way capital management mechanism: raising capital when overvalued and repurchasing when undervalued.

Of course, just like the preferred share repurchase, this $1 billion authorization merely provides management with greater flexibility and does not imply that Strategy will immediately initiate a repurchase. Meanwhile, Strategy has also clearly stated that common share repurchases will not use U.S. dollar reserves; if BTC sales are required to fund repurchases in the future, they must be managed under the unified BTC monetization plan.

Clearly, this is the most controversial part of the entire announcement—polite terms call it “liquidity,” but bluntly, it’s just “selling coins.”

According to the announcement, the board has formally approved a BTC monetization program, authorizing the company to sell a portion of its BTC primarily for three purposes:

• First, establish a U.S. dollar reserve of up to $1.25 billion;
• Second, to pay dividends on preferred shares and interest on debt, or to supplement U.S. dollar reserves, when management believes selling BTC is more advantageous than issuing common stock;
• Third, to fund the repurchase of preferred and common shares, including associated taxes and transaction costs.

Strategy also emphasized that this authorization does not imply an immediate sale of BTC; any sale will still be evaluated based on market conditions, liquidity needs, tax and accounting implications, and long-term shareholder value, among other factors.

But regardless, this is a change worth noting. Over the past few years, Michael Saylor has repeatedly emphasized Strategy’s long-term hold philosophy, and the market has generally viewed it as the ultimate "buy and never sell" whale. For this reason, outsiders have long assumed that Strategy’s sole source of cash was continuous issuance of stock, preferred shares, and convertible bonds, with the proceeds used to keep buying BTC.

At the beginning of this month, Strategy initially sold its BTC holdings, but only 32 BTC, with the official statement describing the move as an “active market desensitization test.” However, this announcement signifies that selling BTC has now been formally incorporated into the company’s capital management toolkit.

However, the Strategy still emphasizes BTC's role as a "core reserve asset," and selling BTC is primarily a liquidity management tool rather than a trading strategy. In other words, the company is not aiming to profit from buying low and selling high, but rather adding a new source of funding when financing costs are too high, market conditions are unfavorable, or repurchasing assets or replenishing cash reserves is more cost-effective.

From a capital allocation perspective, this choice is not necessarily negative and may even be more rational. Of course, for the market, this shift also means that a long-held assumption must be adjusted — previously, investors almost assumed that Strategy would continuously buy BTC, making it one of the most important marginal buyers in the bitcoin market; moving forward, while the company still maintains long-term BTC holding as its core strategy, BTC on the balance sheet is no longer merely a "non-sell reserve asset," but has become a strategic asset that can participate in capital management under specific conditions.

After the strategy was announced, BTC did not experience significant volatility; it briefly surged before quickly falling back to its original level, and is currently still trading around $60,000.

In terms of strategy, its common stock MSTR and preferred stock STRC both saw significant pre-market rallies. As of 9:00 PM tonight, MSTR was trading at $86.74 pre-market, up 5.38%; STRC was trading at $80.90 pre-market, up 8.49%.

Clearly, the market still holds relatively positive expectations for Strategy’s rescue plan. Although confirming the sale of additional BTC will inevitably spark controversy, STRC’s depegging and its impact on Strategy’s business model are clearly more urgent issues and take precedence over maintaining the “diamond hands” image.

Next, whether this capital management framework can truly help STRC return to par value and reopen Strategy’s financing cycle will be the market’s primary focus.