Fueled by a late-summer Bitcoin rally, Strategy posted its first profit in four quarters. Over the three months ended Sept. 30, the firm booked a $21 billion gain driven by mark-to-market adjustments on its digital asset holdings. Because Strategy marks its Bitcoin to market through earnings, big price moves translate into multibillion-dollar swings in results. The firm now holds 848,000 Bitcoin worth roughly $73 billion.
Zoom out and the picture is more mixed. Bitcoin rallied 43% in Q3, yet it is still about 30% lower than a year ago. Strategy's common stock has fallen by more than 50% over that period.
Investors who want Bitcoin exposure without holding the token have been less eager to buy some of Strategy's securities. The company has pulled back on selling common shares amid shareholder concerns about dilution. Seeking an alternative, Strategy last year issued four US-listed series of preferred stock, raising several billion dollars. Those preferreds avoided dilution but carry sizable dividends, which add pressure to cash flow.
Management has leaned on the STRC preferreds as the primary funding tool since the premium on common shares disappeared during the crypto downturn. The preferreds have traded below their $100 face value since May and are hovering around par, making it uneconomic to issue more for fresh Bitcoin purchases. Strategy has spent more than $1 billion buying back its most popular preferred shares to date, part of a broader effort to stabilize demand.
Leveraged bitcoin bets swing a balance sheet hard in whichever direction the price goes. Market Briefs covers crypto and corporate treasuries free every morning.
As the crypto slump dragged on, Strategy rolled out a new capital framework in June. The plan allows the company to repurchase both common and preferred shares and to sell some Bitcoin to bolster liquidity and bring down leverage in its capital structure. With Bitcoin stabilizing in recent weeks, Strategy has resumed buying coins while also selling both common and preferred shares.
A US Securities and Exchange Commission filing on Monday showed the company purchased $28.7 million of Bitcoin between Oct. 1 and Oct. 4, and repurchased $176 million of STRC preferreds. Strategy, formerly known as MicroStrategy, is also changing the cadence of dividends on STRC, moving from semi-monthly to daily payments to encourage demand. According to Michael Saylor, the co-founder and executive chairman, last week's shift could make the preferred shares less volatile and more liquid.
Here is the through-line. When Bitcoin is up, Strategy's income statement can look great. When it is down, the reverse happens.
The firm is trying to thread the needle by leaning on preferred stock instead of common, then buying those preferreds back when conditions are tough, all while tweaking dividends to make the securities more attractive. If you are eyeing Bitcoin-linked plays, watch how that daily dividend change affects STRC trading and how the June framework balances fresh coin buys with buybacks and occasional Bitcoin sales.
A swing back to profit is a reminder of how much is riding on the price. Get the free Market Briefs daily newsletter and watch the exposure.
