Saylor’s Strategy Resumes Bitcoin Splurge at Highest Price Ever

(Bloomberg) -- Strategy Inc., the Bitcoin treasury company founded by Michael Saylor, bought the digital currency for the first time since it reached a record high earlier this month, raising its holdings to over $73 billion after months of tapering off its purchases. 

The firm, formerly known as MicroStrategy Inc. has long been considered a bellwether for crypto sentiment, as it grew to become the largest corporate holder of Bitcoin. But as skepticism over the crypto treasury model rose, Strategy’s stock price has lagged behind Bitcoin as it rallied to a record price of $126,000 this month. 

The Virginia-based firm announced a purchase of an additional 220 Bitcoin in a press release on Monday at an average price of $123,561 per coin, for a total $27 million investment, the highest price Strategy has ever paid per Bitcoin. That’s its fourth smallest Bitcoin acquisition since last October and its seventh smallest on record, according to company data. 

The latest purchase raises Strategy’s Bitcoin holdings to a total of 640,250 Bitcoin, which represents 3% of the nearly 20 million total Bitcoin token in circulation. Its holdings are 12 times those of the next largest holder, according to data from BitcoinTreasuries.net. Strategy’s stock was up 3.5% in Monday trading, and has risen by 8.9% year-to-date.

Recent data suggests that the crypto treasury model is losing steam, not just in its performance, but also through the slowing pace of Bitcoin buying by treasury firms. Yet, Strategy has an advantage over its competitors through a focus on Bitcoin-linked fixed income instruments, according to Benchmark Equity Research analyst Mark Palmer. 

The company has billed its perpetual preferred stock offerings as a way for Strategy to keep buying Bitcoin without diluting shareholders. In this structure, dividends are paid at a variable rate, providing lenders the flexibility to ride out cryptocurrency cycles, notes Palmer. This, in turn, offers Saylor with fresh cash to continue purchasing the token without weakening shareholder value through a stream of share issuances. 

The company’s financing tactics, however, have also drawn criticism after a recent preferred stock sale drew tepid demand, forcing Strategy to issue common shares to make up for the shortfall.

Strategy’s stock got a boost after recent tax legislation that allows it to exclude unrealized gains on holdings of digital assets when calculating corporate tax liabilities. The firm reported an unrealized gain of $3.89 billion on its digital asset holdings for the quarter ending September 30. 

The new tax rule removes a “significant source” of potential overhang for Strategy, according to TD Cowen analyst Lance Vitanza, while it also represents “a key point of Bitcoin integration into global financial systems.” 

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