Strategy puts six times as much cash into STRC buybacks as into bitcoin

The latest coins cost $10,398.10 more apiece than Strategy's average, a premium of about 13.8% ^[16]. Spread across 848,000 coins, that premium moved the average up by roughly $4.10 ^[17]. The purchase itself was about 0.04% of the holding ^[12]. As long as bitcoin trades above $75,440.70, every coin Strategy adds lifts the average cost of the whole position ^[17].

Most of the week's cash went somewhere else. "Last week, we acquired 334 BTC and repurchased $176M of STRC," Executive Chairman Michael Saylor said in a post ^[4]. The filing splits the STRC figure into $102.6 million for Sept. 28-30 and $73.7 million for Oct. 1-4 ^[3], about $176.3 million in all ^[13]. According to Crypto Briefing, the repurchases come under a board-approved program aimed at managing the discount on STRC ^[9], Strategy's variable-rate perpetual preferred ^[10]. In the four days through Oct. 4 the company paid about $99.51 for each of 740,634 shares. That is 49 cents under the $100 level the prediction market is pricing ^[20].

Strategy paid more for the new bitcoin than its own marks put on the coins. The Sept. 30 carrying value works out to about $83,550 a coin on 847,666 coins ^[15]. Saylor's STRC credit figure uses its own price assumption: "USD Duration is 3.6 yrs and STRC's BTC Credit is 50 bps assuming 10% BTC ARR, 40% BTC Vol, and a BTC price of $84,289," he said ^[18]. Both prices are below the $85,838.80 Strategy paid for the newest coins ^[6].

The next few weeks can go one of several ways. If STRC reaches $100, the program has met its stated purpose and the dollars now spent on repurchases are free for bitcoin. If the discount persists, buybacks at last week's size would use about 3% of Strategy's $5.71 billion in dollar assets each week ^[19]. If bitcoin falls below $75,440.70, new purchases would start pulling the average down, at the price of a smaller gain on the coins already held.

I think the filing shows a company that gives the price of its preferred the first claim on spare cash, and pays for bitcoin with MSTR share sales plus small draws on its dollar balance. The counter-case is timing. The larger STRC tranche fell in the last three days of the quarter ^[3], and a single week may reflect quarter-end housekeeping. A run of filings in which bitcoin purchases outweigh STRC repurchases while STRC still trades below $100 would show that view is wrong.