In a strategic move to bolster its financial stability, Strategy has announced the establishment of a substantial $1.44 billion cash reserve aimed at covering dividend payments without needing to sell its Bitcoin holdings. CEO Phong Lee has indicated that the company”s plan is to avoid any Bitcoin sales until at least 2029, underscoring their commitment to long-term asset retention amidst market fluctuations.
Lee emphasized that this reserve serves a dual purpose: it separates immediate cash flow needs from the company”s long-term Bitcoin strategy, providing a buffer that covers approximately 21 months of dividend payouts under current market conditions. “We built this buffer to avoid selling Bitcoin during downturns and to maintain dividend stability,” he stated, highlighting the importance of safeguarding core Bitcoin assets during periods of market weakness.
The reserve is intended to support dividends in U.S. dollars for over two years, allowing the company to manage its short-term obligations effectively while still focusing on long-term growth. “Bitcoin is not for short-term needs,” Lee noted, reinforcing the notion that the cryptocurrency is viewed as a cornerstone of future corporate strategy rather than a liquid asset for immediate use.
Strategy uses a metric known as market net asset value, or mNAV, to guide decisions regarding equity issuance and potential Bitcoin sales. Lee explained that if mNAV falls below 1x, the firm will not issue new shares to fund dividends. This policy is designed to link the company”s stock value closely with its Bitcoin assets, providing a clear framework for financial decision-making.
While the reserve offers significant protection, Lee acknowledged that a prolonged downturn could necessitate changes to their approach. Should Bitcoin prices remain low and mNAV stay below 1x for three consecutive years, selling Bitcoin may become unavoidable.
Furthermore, Strategy”s operational funding strategy leans towards utilizing preferred shares as opposed to traditional equity, which Lee described as offering more flexibility compared to debt or convertible instruments. He confirmed the issuance of perpetual preferred shares and noted that market adoption of this funding model might take several years.
As part of their ongoing strategy, the company plans to continue accumulating Bitcoin only when it has excess capital available, as Lee stated, “We”re not traders; we invest in Bitcoin when funds allow.” This disciplined approach aims to ensure that investor dividends remain stable without compromising the integrity of their Bitcoin holdings. The protective measures surrounding this cash reserve are expected to remain in place at least until the end of 2025.
