rewrite this title and make it good for SEOSaylor’s Strategy Built a Bitcoin Empire… and Now He’s Selling

THE GIST

Strategy reported its first-quarter earnings this week and it was a doozy. Beyond reporting a $12.54 billion loss, Chairman Michael Saylor said the firm plans to do something he said no Bitcoin holder should ever do: sell Bitcoin.

“We will probably sell some Bitcoin to pay a dividend,” Saylor said during their earnings call. “Just to inoculate the market and send the message that we did it.”

Saylor’s strategy to “immunize” the market to the idea of selling Bitcoin is interesting, but for Bitcoin maxis, it’s also blasphemous.

WHAT HAPPENED

Bitcoin rose on the news only to fall slightly from almost $83,000 to $81,500 Wednesday afternoon. Strategy (MSTR) fell 1%, which isn’t all that much considering Saylor went from Bitcoin’s biggest bull to heretic in less than 24 hours.

Saylor’s talk of selling Bitcoin has everything to do with Stretch (STRC) — Strategy’s perpetual preferred stock paying 11.50% annually, in cash, every month. The key to STRC is simple: buyers get a high-yield, near-stable instrument backed by the world’s largest corporate Bitcoin treasury, with the share price pinned near $100 par. Strategy, in turn, gets a continuous stream of fresh capital it deploys into more Bitcoin. Their latest raise was in April.

Now Saylor is staring down the logical endgame. They can’t keep issuing STRC without stacking up perpetual dividend obligations. At some point, one will outweigh the other. More issuance means more cash claims, forever. If STRC demand dries up, the Bitcoin buying stops, defeating the entire point of Strategy’s “strategy.” Based on March numbers, they’re already obligated to pay out just under $1 billion in cold, hard cash to STRC holders each year. They can cover it for now. But if that number keeps growing, the software business isn’t remotely big enough to carry it.

WHY IT MATTERS

Strategy holds about $2.25 billion in cash & cash equivalents and, of course, Bitcoin, valued at about $66.6 billion. The USD cash reserves are what they’ve pointed to in the past when questioned about covering dividends.

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“Our USD cash reserve has remained consistent at $2.25 billion. And while the years of coverage have shifted down with the growth of STRC this year, we believe the stable cash along with our Bitcoin reserves and ability to raise [capital] is sufficient,” CFO Andrew Kang said on the earnings call.

Saylor and Kang have some wiggle room to tap their USD cash reserves, but now, as they “inoculate the market,” they’re opening the door to the possibility of shaving some Bitcoin off in the future to keep this train running. Their hope is that if they sell some now and grit their teeth, once Bitcoin’s bull run kicks off again, they’ll be fine.

And they aren’t selling their full stack. They currently hold 818,334 BTC. They could wipe out every single dollar of debt and preferred equity obligations and still have ~$47 billion in Bitcoin left if they really wanted to. They won’t because this isn’t a forced sell (not yet, at least). If anything, a potential BTC sale is a test of the waters, if you will, to show the market it’s possible to pay dividends without absolutely nuking the entire Bitcoin and crypto market.

It’s a dangerous game, but this is Michael Saylor we’re talking about.

WHAT’S NEXT

Saylor and Strategy are closing out one “Bitcoin Strategy” cycle and opening another. He made that clear when he said, “You buy Bitcoin with credit, you let it appreciate, and then you sell Bitcoin to pay the dividend.”

And this was news to everyone. Before, Saylor was screaming “Never sell your Bitcoin” and “thermodynamic hornets” on every podcast and media outlet that would have him.

This is also a moment where Bitcoin’s monetary nature is being redefined. Before Saylor’s switcheroo, everything led to buying and holding more Bitcoin. The irony in all of this is that, because of the capital structure Saylor designed on top of Bitcoin to force its adoption in larger markets, he is now forced to sell the one asset to service obligations to STRC holders in dollars. In a sense, it validates Bitcoin’s liquidity as a treasury asset, but it also completely betrays the Bitcoin maxi-narrative Saylor and others have pitched insufferably to the world, only to turn around and do the opposite when they got too big. Kind of like the banks.

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