- The Correction: CEO Phong Le states Strategy (MSTR) operates with just 12% leverage, defying distressed market narratives.
- The Defense: The firm raised $1.44 billion in equity in just 8 days, securing 21 months of dividend coverage to protect against volatility.
- The Stakes: The Operating Company classification is a strategic bid to prevent removal from the MSCI USA Index.
Strategy Inc. (formerly MicroStrategy) launched a targeted offensive against market “misconceptions” Tuesday, with CEO Phong Le categorically rejecting claims that the Bitcoin treasury firm is over-leveraged.
Strategy Has a Low Leverage With a Strong Balance Sheet
During a Bloomberg interview, Le noted that Strategy is 12% leveraged and adding their preferreds brings it up to 27%. That is lower than typical companies in the US, which are over 60% leveraged. According to Le, rumors in the public space claiming that Strategy is highly leveraged contradict the actual situation.
Le also debunked the idea that Strategy is unable to pay down dividends using its balance sheet. He outlined the company’s achievements in this regard, including the issuance of $1.44 billion worth of equity within eight days to cover 21 months, in addition to 74 years of dividend payments in its equity.
Related: Why Strategy (MSTR) Is Now Worth Less Than Its Bitcoin Holdings
No Plans of Selling Bitcoin Soon
In the meantime, Le clarified that Strategy is not considering selling its Bitcoin holdings in the short term. Although that could be an option, he gave the assurance that the Bitcoin treasury is operating a healthy balance sheet that does not require embarking on the alternative plan.
Meanwhile, Le further noted that his company intends to maintain a cash reserve of two to three years’ worth of its dividends, which we grow as the firm issues more preferred shares. According to him, Strategy will adopt this pattern for the next five to ten years before reassessing it.
Strategy is not an ETF
Le addressed the compressing mNAV situation of Strategy, noting that the firm has experienced a similar situation in the past, particularly during the 2022 crypto winter. According to him, Strategy bounced back from the bear market, alongside Bitcoin, which highlights the misconception in many quarters where people relate Strategy to an ETF rather than the Bitcoin operating company that it is.
According to Le, such a misconception is one of the reasons why some companies, including JPMorgan (MSCI), think the firm should not be part of their indices. He noted that Strategy has kick-started an education process to clarify such a misconception across the investment ecosystem.
Related: Saylor’s Strategy Builds $1.44B ‘Cash Moat’ to Protect Dividends, Cuts Bitcoin Outlook
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