The first thing you need to know about Strategy (MSTR -5.28%) -- the company currently doing little else besides buying and hoarding Bitcoin (BTC +0.38%) -- is that it has not purchased any new Bitcoin since June 22. Since then, the company has instead sold Bitcoin four different times.
So just how concerned should investors be? According to Strategy CEO Phong Le, Bitcoin accumulation will continue later this year, as soon as the company builds a stronger balance sheet and props up the value of its STRC (STRC -0.37%) preferred stock offering.
A new strategy for Strategy
In June, Strategy (the company formerly known as MicroStrategy) announced a brand-new capital management plan designed to put the company on a stronger financial footing, given that the price of Bitcoin continues to drift downwards. The strategy relies on a newfound willingness to sell Bitcoin when necessary, something the company previously said it would never do.
Image source: Getty Images.
This new strategy has had some early success, at a cost. The company's U.S. dollar cash reserves are now $4.65 billion, meaning that it should now have enough cash to cover operating expenses and dividend payments for the foreseeable future.
That reserve wasn't built from Bitcoin sales alone. The most recent round raised $653.1 million by selling Strategy shares, which outweighed the $108.6 million from the 1,690 BTC sale. Shareholders are funding the balance-sheet repair through dilution.
The company has had some success in propping up the value of its STRC ("Stretch") preferred stock offering. It traded as low as $75 this summer, but at a current price of $95, it's now almost back to par ($100).
NASDAQ: STRC
Key Data Points
From this perspective, it could be time for investors to get back to buying Strategy soon. The company's financial performance appears to be leveling out, and it has become much more strategic about how it deploys Bitcoin.
With that in mind, Le recently promised to resume buying Bitcoin by the end of the year. He also emphasized that the company remains a heavy net buyer of Bitcoin. Year to date, Strategy has acquired 175,000 BTC and sold just 7,000 BTC.
Where does Bitcoin go from here?
However, everything still depends on the price of Bitcoin, which is down about 27% for the year and trades at just $64,000. That's alarmingly low, given that Strategy acquired its 840,447 BTC at an average price of $75,385.
The August sale went off at $64,262, below the company's own cost basis.
CRYPTO: BTC
Key Data Points
As long as Bitcoin remains mired below $75,000, the company will continue to report massive unrealized losses. It recently reported a paper loss of nearly $10 billion on its Bitcoin position.
These losses have made it nearly impossible for Strategy's Bitcoin buying operations to continue as before. In fact, it's quite possible that the company's aggressive Bitcoin buying strategy might be on hold until 2027. The company continues to spend cash buying back its preferred stock, and that's money that should have been spent buying more Bitcoin.
NASDAQ: MSTR
Key Data Points
For that reason, I'm out on Strategy right now. Its stock price has done nothing since June. That coincides with the period of time when the company stopped buying Bitcoin. For now, investors are better off buying Bitcoin directly.
