Galaxy Research Says Strategy Capital Plan Buys Time, Leaves Structural Issues

Galaxy Research said Strategy’s new capital framework has eased near-term liquidity concerns, but does not fully remove the company’s structural strain.

In a weekly research brief published July 3, Alex Thorn, Galaxy Research’s head of research, called Strategy’s Digital Credit Capital Framework a “smart decision,” while saying it may not “solve the structural problem forever.”

Strategy unveiled the Digital Credit Capital Framework on June 29. The plan includes a dollar reserve policy, an adjustment to STRC’s dividend policy, buyback programs of up to $1 billion each for preferred and common shares, and a Bitcoin monetization program. STRC’s annual dividend rate was raised to 12.0% from 11.5%.

The measures came after heavy pressure on STRC, Strategy’s preferred stock product. STRC was designed to trade around $100, but fell to $71.25 on June 26 as Bitcoin declined, dollar reserves shrank and concerns grew over dividend funding.

Thorn said the market’s main concern was dollar liquidity rather than a lack of assets. Strategy holds about 847,363 Bitcoin, but questions had mounted over whether it had enough cash to keep paying preferred dividends steadily.

According to Thorn, Strategy has raised more than $1 billion in cash through common-share issuance and has formally adopted a policy to maintain at least 12 months of cash reserves. It now has enough capacity to cover about 17 months of dividend and interest payments.

“The market was worried about near-term funding pressure, and Strategy bought itself meaningful time,” Thorn wrote. He said the more important takeaway from the announcement was not any individual measure, but the board’s approval of a wider set of capital-management tools.

Quoting Chief Executive Officer Phong Le, Thorn wrote that Strategy is “evolving from one-way capital issuance to active capital management.” In his view, that signals the company is moving away from accumulating Bitcoin regardless of market conditions and toward managing both sides of the balance sheet.

The most controversial element is the Bitcoin monetization program. Thorn said the wording means Strategy could sell Bitcoin if needed. But that does not mean a sale has been decided, only that the board has left open the option of converting some Bitcoin into cash.

“We would not want to see Strategy sell Bitcoin,” Thorn wrote. He said the company’s identity and MSTR premium have long rested on the premise that it offers a permanent vehicle for long-term Bitcoin exposure, and that selling Bitcoin could weaken that narrative.

Still, he said he understands why the company left that option open. “A company with 847,363 Bitcoin should not allow temporary cash-flow concerns to escalate into an existential crisis,” Thorn wrote. If selling a small amount of Bitcoin can prevent a disorderly deterioration in the capital structure, protect preferred shareholders and buy time until market conditions improve, he said, it would be a defensible choice.

Thorn also suggested Strategy should consider ways to generate income without directly selling its Bitcoin. Those could include lending part of its holdings on conservative terms or using options strategies to monetize volatility. He added that lending introduces counterparty risk, while options can limit upside, making strict risk management essential.

Thorn said the Bitcoin market remains weak and may not yet have found a bottom. “Sometimes the best trade is no trade,” he wrote, adding that the latest measures give Strategy room to wait for better market conditions.

Strategy’s new capital policy was greeted positively by the market immediately after the announcement. MSTR rose about 12.6% that day, while STRC gained about 12.2%. Even so, Thorn said Strategy still carries a large preferred-stock structure and recurring payment obligations, meaning the measures bought time but did not fully resolve its longer-term structural issues.