Is MSTR selling Bitcoin? Don't panic! Michael Saylor personally explains the truth behind the 'net sell'

As an investment tool that has long focused on the integration of virtual assets with traditional finance, Strategy (referred to as MSTR) has garnered significant market attention for its long-term Bitcoin holding strategy. Recently, comments made during the company’s earnings call and subsequent interviews about potentially selling some Bitcoin to fulfill STRC dividend obligations sparked investor discussions. Some market participants believe this contradicts Michael Saylor's well-known stance of 'never selling Bitcoin.' Here, we will outline its operational model, recent statements, and potential impacts.

MSTR and STRC Operational Model

Strategy's core model is to raise capital through capital market instruments, primarily to increase Bitcoin holdings, while providing participation channels for investors with different risk appetites (MSTR and STRC). MSTR common stock reflects the overall value of the company and the leverage effect of Bitcoin holdings, with relatively high volatility.

The STRC (Stretch Preferred Stock, Variable Rate Series A Perpetual Preferred Shares) is a key financial innovation tool launched by the company, with a target price revolving around the $100 par value. It dynamically adjusts through a variable dividend rate (currently around 11.5% annualized), aiming to provide cash dividend options for investors who prefer relatively stable returns. The company raises funds for Bitcoin purchases via the ATM (at-the-market) issuance mechanism of STRC, forming a capital recycling mechanism.

Monthly cash dividend payment mechanism of STRC:

Image source: Strategy

This structure allows the company to support the dividend requirements of preferred shares based on the potential appreciation of Bitcoin while gradually expanding its overall holdings. As of the latest update, the company’s Bitcoin holdings have exceeded 818,000 coins, making it an important force in the Bitcoin market. The introduction of STRC provides a participation path for yield-oriented investors, but its sustainability still depends on market conditions, Bitcoin price trends, and execution effectiveness, carrying some uncertainty.

First mention of 'prepared to sell Bitcoin if necessary to pay dividends'

During last week's earnings call, Strategy mentioned for the first time that under certain conditions, it might sell part of its Bitcoin holdings to fulfill STRC dividend obligations. This statement was mainly based on capital management considerations, such as when selling Bitcoin generates more value than issuing new shares or optimizing the balance sheet.

Later, in a deep-dive interview on the David Lin podcast, Michael Saylor elaborated on this point. He stated, 'We are prepared to sell Bitcoin if necessary to pay STRC dividends. The key takeaway is that we want the market to understand that capital gains from Bitcoin can be used to fund credit dividends. When we sell $1 million worth of STRC credit products, we immediately turn around and buy $1 million worth of Bitcoin.'

Saylor further explained that there had been confusion in the market, as the company historically supported dividends by selling common stock (MSTR equity), which often traded at a premium to Bitcoin. This clarification about using Bitcoin capital gains aims to reinforce the business model: 'Sell credit lines to invest in Bitcoin; over time, the value of this investment grows faster than the accumulation of dividends; then we monetize the capital gains and pay out dividends.' He used real estate development companies as an analogy, emphasizing that this is a standard logic of using capital appreciation for credit arbitrage.

Selling Bitcoin should not be overinterpreted; Saylor emphasizes no net selling

Many investors were confused by Saylor’s statement, seeing it as contradictory to his previous stance of 'never sell your Bitcoin.' During the interview, Saylor directly addressed this concern: 'I became known for saying never sell your Bitcoin... but to be more precise, it should be never become a net seller of Bitcoin.' He acknowledged that the original phrasing was more catchy, but the core logic has always been net accumulation.

He further illustrated the recycling mechanism: 'Even if we have to sell 1 Bitcoin, we will buy back 10 to 20. Essentially, while you are buying 30 Bitcoins, you are selling 1.' In April, the company sold $3.2 billion worth of STRC to purchase the corresponding Bitcoin, while dividends were only around $80-90 million. 'Our 'break-even rate' is approximately 2.3%... I expect that in every month and every quarter going forward, we will be net buyers of Bitcoin.'

Saylor emphasized that the company will flexibly choose tools based on market mispricing, including repurchasing undervalued bonds, with the aim of serving the overall interests of shareholders, particularly boosting Bitcoin per share. In response to critics such as accusations of a 'Ponzi scheme,' he explained that STRC adopts an over-collateralized model (with $5 of Bitcoin supporting $1 of credit bonds), offering volatility-sensitive investors a relatively stable principal with high returns, essentially 'extracting or distilling returns from digital capital.' This explanation attempts to clarify that occasionally selling small amounts of Bitcoin is a flexible arrangement within the capital management toolkit, not a strategic shift.

For investors, this model serves as a reminder to focus on the long-term trend of MSTR's Bitcoin holdings per share rather than individual events. Any capital operation involves liquidity, valuation volatility, and uncertainties related to market conditions, so the actual execution needs to be carefully assessed.

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