In an 8-K filing with the U.S. SEC, Strategy officially launched its digital credit capital framework, designed to optimize capital structure and enhance financial flexibility while protecting preferred shareholder interests. The framework consists of five core elements: a USD reserve policy, adjustments to the STRC dividend policy, a preferred stock buyback plan, a common stock buyback plan, and a Bitcoin liquidation plan.
USD Reserve Policy
Under the new policy, the USD reserve may only be used to pay preferred dividends and debt interest. Management is required to maintain a reserve level that covers at least the next 12 months of expected dividend and interest payments. As of June 28, the USD reserve balance stood at $2.55 billion, indicating strong short-term solvency and providing a cushion for future dividend payments.
STRC Dividend Adjustment
For STRC preferred shares, the company will now determine monthly dividend rates dynamically, taking into account trading prices, market yields, credit spreads, and Bitcoin price volatility. The dividend rate will not be automatically raised simply because STRC trades below par value. Effective July 1, the annualized dividend rate on STRC has been increased to 12%, a significant boost that enhances the appeal of this preferred security.
Buyback Programs
Strategy has authorized two separate $1 billion repurchase programs: one for preferred shares (STRC, STRF, STRD, STRK, etc.) and one for Class A common stock. STRC is designated as the primary target for the preferred share buyback. Importantly, neither buyback program will utilize the USD reserve, underscoring the company's prudent cash management approach.
BTC Liquidation Plan
The board has also authorized a Bitcoin liquidation plan, allowing the company to sell up to $1.25 billion worth of Bitcoin. Proceeds can be used to replenish the USD reserve, pay preferred dividends and interest, or fund the aforementioned buyback programs. This initiative provides a flexible liquidity channel while preserving the long-term value of Strategy's Bitcoin holdings.