Strategy shifts into defense mode as it bulks up a $2 billion cash reserve

Kelly Evans (Anchor) 00:00.310

mackenzie sagalos has the details mackenzie

Mackenzie Sigalos (Business News Reporter) 00:03.350

hey kelly that's right and what's notable here is the shift in priorities strategy liquidated three quarters of a billion dollars in shares this week not to buy bitcoin which is usually the move when prices dip but to add to a cash reserve that's now at two point two billion

Mackenzie Sigalos (Business News Reporter) 00:17.150

dollars they set up that fund at the start of this month specifically to cover preferred dividends and debt interest without having to sell any bitcoin now the stock it is down nearly fifty percent year to date and you can see why chairman michael saylor is playing defense

Mackenzie Sigalos (Business News Reporter) 00:31.150

strategy is now trading at a discount to bitcoin on its books meaning that investors can get exposure at around eighty cents on the dollar that breaks the model the whole playbook was issue shares at a premium buy bitcoin and then said premium justifies itself but when it

Mackenzie Sigalos (Business News Reporter) 00:46.910

vanishes issuing shares becomes dilutive and the flywheel stops now the next test is january fifteenth msci deciding whether to boot strategy from its indexes JP morgan estimates that could trigger nearly nine billion dollars in stock sales if other index providers follow and it

Mackenzie Sigalos (Business News Reporter) 01:03.550

not just strategy the broader digital asset treasury trade is unwinding bitmite immersion is down eighty percent from its summer peaks so is metaplanet in japan same playbook everywhere same problem when the premium disappears the model breaks kelly

Kelly Evans (Anchor) 01:19.830

i mean look this was obvious you know as soon as these companies decided to go this route we had the CEO of strategy on not long ago and i thought he said it was more in the low seventies that they would eye making perhaps a bigger change so they've got a comfortable cushion a

Kelly Evans (Anchor) 01:31.870

lot of their purchases were made at much lower but as you mentioned the higher beta plays on all of this i mean it's up to bitcoin to prove like tom lee was saying the other day he thinks it's an eight week shakeout still from whatever happened on october tenth which he thought

Kelly Evans (Anchor) 01:43.590

was maybe a big liquidation event or something and if they can find their footing again then we can talk about the trades taking off again that rely on that but in the meantime it's hard to see why it you know it make makes much sense yeah

Mackenzie Sigalos (Business News Reporter) 01:54.470

and a lot of the the conversation from the strategy side of this is looking at two different things one they still have that buffer between the acquisition price of bitcoin it's an average of seventy five K versus the eighty nine K where it's trading today so it's a much smaller

Mackenzie Sigalos (Business News Reporter) 02:06.550

margin than it used to be but they would say we saw the buffer there and also their debt is long dated and doesn't start to mature in large blocks until twenty twenty seven the argument that they've made is that even if bitcoin dropped fifty percent they'd likely restructure

Mackenzie Sigalos (Business News Reporter) 02:20.270

before liquidating but of course we'd see an erosion of confidence in the trade if that's happening

Kelly Evans (Anchor) 02:24.630

all right and we'll look to see if that does happen on the index front mackenzie thanks very much