Key conclusions
- Strategy purchased 1,665 bitcoins for $142.7 million, paying an average of $85,681 per coin. This is more than bitcoin cost at its highest point in the last 24 hours.
- USD 103.5 million was spent on this purchase from the sale of its own shares, and the rest was provided by the company from its cash reserve.
- The vault now holds 847,666 bitcoins, purchased at an average of $75,437. In July, the same company sold 3,588 coins.
On Sunday, Michael Saylor posted one sentence on his profile saying that it will be more orange. On Monday morning, the report came out and it turned out what the announcement was about. The company purchased an additional 1,665 bitcoins. What’s more interesting is at what price and from what.
How much Strategy paid for the coin
The average purchase price came out $85,681. Bitcoin has never been this expensive this day, and at the time of writing it is trading at $83,271.
Is that a lot? With a treasury worth tens of billions, not much. I calculated the difference and at the current rate, this one purchase is about $4 million underwater. However, it is worth knowing that the company did not buy at the bottom, but above the entire range of that day.
The purchase did not come at a cheap time.
Where did the company get the money for this?
Here’s something that’s easy to miss in the message. Of the total amount USD 103.5 million came from the sale of own sharesthe rest was added in cash. None of those dollars came from operating profit or a new loan.
Why does this even work? Because the company’s shares are more expensive than the bitcoins behind them. Today the surplus is nine percent. So the company releases shares and takes more for them than the coins inside are worth. For this difference he buys more coins. Each such turnover increases the number of bitcoins per share. As long as the surplus is positive, the shareholder benefits. Once he disappears, the same operation begins to work against him.
So Strategy converted its own shares into coins.
Does this contradict the July sale?
Now he sells shares and buys coins. In July, she sold the coins and left the shares. The direction depends on what is easier to cash in in a given week and what is more expensive at a given time.
The company trades both assets at once and switches leverage between them.
What does this mean for you
If you’re considering Strategy stock as a way to gain exposure to bitcoin, take this surplus into account. Today you are paying nine percent more than the value of bitcoin per share. When you buy bitcoin outright, you don’t pay it at all.
A surplus is an argument as long as it grows. When it falls, you lose twice: on the bitcoin price and on its narrowing. In June it disappeared completely, i.e. the market valued the company cheaper than the coins in its treasury. At this level, selling shares to buy bitcoins no longer makes arithmetic sense.
Also check what you expect from such a position. If you want just bitcoin, stocks add share price risk and company debt risk. They also factor in management decisions about when to sell coins. July showed that such decisions are made.
For every dollar in Bitcoin Strategy you pay one dollar and nine cents today. In June, the same dollar was worth less than a dollar.
