Bitcoin Giant Strategy Slashes Cash Reserves by 61% to Repurchase $1.5 Billion in Debt

In brief

• Strategy used 61% of its dedicated cash buffer ($1.38 billion) to repurchase $1.5 billion in convertible notes.
• Despite earlier corporate signals, the firm’s entire stash of 843,738 Bitcoin remained untouched during the debt repurchase.
• Although Bitcoin’s price has fallen roughly 12% year-to-date, the Bitcoin buying firm’s common shares have advanced 8.8% since January.

Strategy burned through most of its cash reserves while extinguishing debt last week, leaving the Bitcoin-buying firm with fewer funds on hand to pay preferred stockholders.

The Tysons Corner, Virginia-based firm now has $871 million set aside to pay dividends and service debt, representing a $1.38 billion drawdown, Strategy said in an announcement. The company had previously earmarked $2.25 billion for such purposes.

This month, the Bitcoin-buying firm’s leadership signaled that Strategy could employ the full scope of its resources while managing its massive debt burden. That included the possibility that the world’s largest Bitcoin holder could sell the digital asset for the first time in years.

Instead, the company took a 61% chunk out of its cash reserves, a buffer created in December to calm investor anxiety and prevent Strategy—which currently owns 843,738 Bitcoin worth $64.7 billion—from having to offload the digital asset at depressed prices. 

On Myriad, a prediction market owned by Decrypt parent company Dastan, traders penciled in a 71% chance that Strategy sells Bitcoin this year. That marked a decrease compared to a week ago, when traders had foreseen an 85% chance of that happening.

When the company initially shored up cash, TD Cowen analysts characterized the move as prudent, posting that the company had “gone a long way toward putting to bed any lingering questions around its ongoing access to capital markets.”

Strategy CFO Andrew Kang noted that the company’s available cash shapes sentiment toward its products, including Stretch (STRC). The variable-rate preferred stock, which has ballooned to a market cap of $10.4 billion, currently offers an 11.5% annual dividend paid monthly. According to internal metrics, this rate largely influences $1.71 billion in yearly obligations.

“Strategy remains committed to maintaining a robust cash reserve,” Kang said in a statement. “We plan to replenish our cash reserve over time through a mix of Digital Capital, Digital Credit, and Digital Equity sales based on market conditions.”

Not long after Tuesday’s opening bell, the company's shares had risen 3.7% to $166, according to Yahoo Finance. Although Strategy’s stock price remains far below last year’s peak of $457, the Bitcoin-buying firm’s shares have advanced roughly 7% year-to-date. Meanwhile, Bitcoin changed hands around $77,200, falling nearly 12% since January, according to CoinGecko. 

Strategy co-founder and Executive Chairman Michael Saylor said the company’s latest transactions showcased the “optionability” of its capital structure, providing the firm with “multiple levers to optimize our balance sheet and respond to market conditions.”

After repurchasing $1.5 billion in convertible notes for around $1.38 billion, the company was left with $6.7 billion in debt outstanding that can be converted into common shares under certain conditions, a portion of which can be sold back by investors as early as September 2027.

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