Michael Saylor Says ‘Fixing The Credit’ Takes Priority Over MSTR Stock Buybacks

During the Q2 earnings call, Saylor said a stronger credit business could ultimately support a higher equity premium for MSTR shareholders.

• Strategy executive chairman Michael Saylor expects to maintain larger cash balances going forward.
• Saylor said the company could eventually use its growing liquidity to buy back preferred stock, repurchase MSTR shares, retire debt, or acquire more Bitcoin.
• He added that Strategy has no interest in seeing the preferred stock trade above its $100 reference level.

Strategy (MSTR) executive chairman Michael Saylor said Monday that the company remains “open” to buying back its own stock if it trades at a deep discount to its net asset value, but said the company’s immediate priority is strengthening its credit business.

“We’re open to buying back MSTR if it trades at a discount to NAV or if it’s the right thing for the company to do,” Saylor stated during the company’s second quarter (Q2) earnings call. “But right now it's not the highest priority for the company.”

Instead, Saylor said Strategy is focused on ensuring that the company’s primary credit instrument, the ‘Stretch’ preferred stock (STRC), trades at par. “The best thing we could do right now is fix the credits,” he said. According to him, building a stronger credit business could ultimately do more to support the value of its common stock than an immediate share repurchase program.

Saylor's comments come after Strategy announced on Monday that it had sold about 3.5 million shares of MSTR common stock through its at-the-market (ATM) program, generating more than $333 million in net proceeds.

MSTR stock rose over 4% in midday trade amid a broader rally in crypto equities as Bitcoin (BTC) reclaimed the $64,000 mark. Bitcoin’s price rose around 1.2% in the last 24 hours, recovering from a dip below $63,000 over the weekend. On Stocktwits, retail sentiment around MSTR and Bitcoin improved to ‘bearish’ from ‘extremely bearish’ over the past day.

Saylor Says Strategy Must ‘Fix The Credit’

Saylor's primary message during the earnings call was that Strategy should direct its available capital toward strengthening its preferred-stock and credit products before using that capital to repurchase MSTR shares.

According to him, a stronger credit business could help expand the premium investors assign to Strategy's equity. By contrast, using capital for stock buybacks before establishing that business could weaken the company's credit profile.

He stated that if there is no credit business, the equity would be worth zero. “But if there is a credit business, then there’s just a debate over whether or not it’s worth $50 billion or $100 billion or $250 billion or a trillion,” Saylor said.

He added that the company has no interest in having STRC trade above $100.

Larger Cash Balances, More Flexibility

Saylor stated Strategy expects to maintain larger cash balances going forward, alongside its growing Bitcoin holdings. Saylor said Strategy expects its USD Reserve, Bitcoin reserve, and unrestricted operating cash to all increase over time.

“I think we'll always carry large cash balances going forward,” he stated, adding that it gives Strategy more flexibility to act when opportunities emerge.  The USD funds could eventually be used to buy back preferred stock, repurchase MSTR shares, retire debt or purchase more Bitcoin, depending on market conditions and what management considers the best use of capital.

Saylor did not comment on whether the company would continue selling Bitcoin or resume buying back the apex cryptocurrency.  Since May, Strategy has sold about 6,948 BTC for approximately $431.8 million in proceeds. The latest sale came last week after the company sold 1,690 BTC for around $108 million. 

MSTR stock has fallen over 37% year-to-date, while Bitcoin’s price has dropped around 26%. 

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