Strategy CEO on selling bitcoin: When it's better than issuing equity to pay dividends, we'll do it

Key Concepts

• Bitcoin per Share (BPS): A core performance metric used by MicroStrategy to evaluate the value created for shareholders.
• Digital Credit (STRETCH): A perpetual preferred stock issued by the company with an 11.5% monthly yield.
• Accretive Strategy: The decision-making framework where the company sells Bitcoin only when it increases the value of "Bitcoin per share" for common shareholders.
• NAV (Net Asset Value): The value of the company's assets minus its liabilities; used to determine if the stock is trading at a premium or discount.
• Liquidity: The ability to buy or sell assets without significantly impacting market price.

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1. Strategic Shift: From HODL to Active Management

MicroStrategy has transitioned from a "never sell" Bitcoin philosophy to an active management strategy. CEO Fong Li emphasizes a shift toward "math over ideology." The company now evaluates whether selling Bitcoin is more beneficial than selling equity to fund dividends or operations. The primary objective is to ensure that any sale of Bitcoin is accretive—meaning it increases the amount of Bitcoin held per common share.

2. The Role of STRETCH (Digital Credit)

The company has raised $8.5 billion in ten months through its "STRETCH" digital credit offering.

• Yield Management: The company uses Bitcoin sales to pay the 11.5% monthly yield on STRETCH when it is mathematically advantageous to do so.
• Decision Framework: The company sells Bitcoin to pay dividends specifically when the company’s price is trading below its Net Asset Value (NAV).
• Tax Optimization: Beyond dividend payments, the company utilizes Bitcoin sales to capture tax gains or realize tax losses strategically.

3. Liquidity and Market Impact

A major concern addressed is whether MicroStrategy’s massive holdings (nearly 4% of all Bitcoin) create liquidity constraints.

• Market Depth: Li notes that Bitcoin trades over $60 billion daily.
• Impact Analysis: With an annual dividend obligation of $1.5 billion, the company’s potential sales represent only a fraction of daily market volume (basis points).
• Evidence: Li points to recent weeks where the company ceased buying Bitcoin, yet the price continued to rise, suggesting that MicroStrategy’s activity does not dictate market price movements.

4. Financial Health and Dividend Coverage

The company maintains a robust financial position to support its dividend obligations:

• Coverage: The company currently has 18 months of dividend coverage, backed by approximately $60 billion in Bitcoin holdings.
• Leverage Metrics: Leverage is maintained between 10% and 15%, with an amplification level of roughly 35%. Li argues that these KPIs would qualify the company as an "investment-grade" entity if evaluated by traditional standards.

5. Corporate Structure: Software vs. Bitcoin

When asked about the possibility of "hiving off" the software business, Li dismissed the idea. He characterized the software division as a "non-material" part of the business, valued at approximately $500 million, which does not warrant a structural separation from the core Bitcoin-focused strategy.

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Synthesis and Conclusion

MicroStrategy’s current strategy represents a pivot toward sophisticated capital allocation. By leveraging the liquidity of the Bitcoin market and utilizing the STRETCH preferred stock, the company aims to maximize shareholder value through a data-driven approach. The core takeaway is that the company is no longer a passive holder of Bitcoin; it is an active manager that uses its treasury to optimize for "Bitcoin per share," while maintaining conservative leverage ratios to ensure long-term dividend sustainability.