Holding 4% of the world's Bitcoin! The market is closely watching MSTR's "coin-selling logic," and its stock price has dropped 75% in a year.

Holding 4% of the world's Bitcoin! The market is closely watching MSTR's "coin-selling logic," and its stock price has dropped 75% in a year.

Strategy is using Bitcoin to pay for its own capital structure. The world's largest corporate Bitcoin holder is facing a mathematical dilemma brought on by its business model—as its stock price premium disappears and financing windows narrow, the promise of "never selling Bitcoin" has quietly given way to real liquidity pressure.

WallstreetCN article reports that Strategy disclosed on July 6 that it sold 3,588 Bitcoins between June 29 and July 5, cashing in about $216 million to pay for its preferred stock dividends. This is the largest Bitcoin sale in the company's history, and the third sale since it began its Bitcoin strategy in 2020.

After this news was announced, MSTR’s stock price fell more than 5% intraday, and Bitcoin dropped to about $61,800, below the company’s average holding cost of about $75,700. The company confirmed a digital asset loss of $8.32 billion in the second quarter, while Bitcoin’s price dropped 14% during the same period.

The market’s caution stems not just from the sale itself, but from the shift in underlying logic. Strategy holds 843,775 Bitcoins, about 4% of the global total, meaning any large-scale selling could significantly impact the price.

According to the Wall Street Journal analysis, Strategy’s key valuation metric, mNAV, has fallen below 1, meaning the market values the company below its Bitcoin holdings, fundamentally undermining its business logic of "using premium-priced stock to acquire Bitcoin."

The "Never Sell Bitcoin" Promise Weakens, Sale Scale Expands Hundredfold

Strategy had long considered "never selling Bitcoin" as a foundation of its business model, but this promise has evidently begun to crack.

At the end of May this year, the company broke with precedent for the first time, selling 32 Bitcoins for about $2.5 million to pay preferred stock dividends, emphasizing that this move was only to fulfill commitments to preferred shareholders and did not signal a strategic shift.

However, the latest round of sales expanded to 3,588 Bitcoins, about 100 times the amount sold in May. According to company disclosures, 1,363 were sold at an average price of around $59,300, with the remaining 2,225 sold at around $60,800.

WallstreetCN article reports that the proceeds from this sale will be used specifically to pay second-quarter dividends for four preferred securities—STRF, STRE, STRK, STRD—and the June monthly dividend for STRC. Selling Bitcoin is no longer just a symbolic, one-off action but is gradually becoming part of the company’s regular financing system.

Notably, on June 29, Strategy officially announced that its board had authorized the sale of up to $1.25 billion worth of Bitcoin to buy back stock and pay interest and preferred stock dividends. This marks the official abandonment of its "hold Bitcoin at all costs" philosophy at the company level.

It’s worth noting that the capital structure underpinning this business model is under increasing pressure.

Analyst Zach Pandl pointed out that Strategy’s annual preferred stock dividend payments are about $1.5 billion, and its software cash flow cannot cover these amounts. When cash reserves are insufficient, the company can only continue to raise funds or sell Bitcoin.

As of July 5, Strategy held 843,775 Bitcoins and had $2.55 billion in cash reserves. The company estimates this cash buffer can provide about 17 months of interest and preferred stock dividend payments without touching its crypto assets.

Strategy’s operating logic is becoming clearer: when financing is smooth, keep buying Bitcoin; when financing tightens, sell a small amount of Bitcoin to pay dividends, thus maintaining the closed loop of its capital operation system.

Although after the first sale at the end of May, the company quickly bought 1,550 Bitcoins, and it had previously made massive purchases of $2.54 billion in April and $2 billion in May, the sustainability of this system is being questioned as Bitcoin prices come under pressure.

The core of Strategy’s business model lies in using stock price premiums as "currency" to continuously buy Bitcoin. The quantitative anchor for this logic is the mNAV metric devised by the company.

According to the Wall Street Journal, Strategy defines mNAV as the ratio of the company’s enterprise value to the value of its Bitcoin holdings. In its heyday, this metric remained at a high premium, allowing the company to continually issue shares to buy more Bitcoin, in a manner similar to traditional M&A companies using high-valued stocks as currency for continuous acquisitions.

However, with MSTR stock down about 75% over the past year, mNAV last month fell below 1, meaning the market values Strategy below the book value of its Bitcoin holdings, making this "snowball" model run in reverse.

More concerning is that this metric itself has a systematic overvaluation problem. The Wall Street Journal points out that Strategy calculates enterprise value using the principal of its debt and face value of its preferred stock, instead of their market value. As the prices of company bonds and preferred stock plummet alongside the share price, this calculation has become seriously distorted.

For example, on June 26, Strategy reported an mNAV of about 0.99, but when calculated using market value for debt and preferred equity, the real mNAV was only about 0.89. At the time, company debt traded at a 7% discount and preferred stocks, in aggregate, at a 28% discount.

As of last Thursday’s close, Strategy’s official website reported an mNAV of 1.09, but when calculated using market values, the real figure was only about 1.04, leaving minimal premium space.

Selling Pressure and Market Chain Reactions

The size of Strategy’s Bitcoin holdings means that any selling action carries systemic significance for the market.

Strategy holds about 4% of global Bitcoin totals. Even the small-scale operation in May, selling only 32 Bitcoins for $2.5 million, brought notable downward pressure to Bitcoin and MSTR prices.

Analysts believe that even though this sale of 3,588 Bitcoins is still only a tiny fraction of its holdings, concerns about potential large-scale selling have notably increased.

According to Strategy’s own logic, when mNAV remains at a discount, the company should sell Bitcoin to buy back its own securities. Investors are closely watching to see if this signal will evolve into large-scale action.

To stabilize the price of preferred stock, on June 29, Strategy raised the dividend rate of its largest preferred stock series, STRC, to 12%, seeking to attract buyers and push the price back towards face value. This move itself shows that the company cares far more about the market price of its preferred shares than its attitude conveyed in the calculation of mNAV.

The Wall Street Journal points out that if the market continues to price Strategy at a discount for an extended period, the company will face cash exhaustion and be forced to use its Bitcoin reserves on a large scale. Strategy may have gained some breathing room, but how long this lasts is still unknown.

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