Galaxy Digital: Strategy's capital plan is about buying time, not a long-term fix

Strategy's (MSTR) new capital management plan, designed to address the sharp decline in its preferred stock (STRC) and its dividend burden, is more of a stopgap measure to buy time than a fundamental solution, according to Galaxy Digital. Alex Thorn, head of research at Galaxy Digital, noted on X that Strategy still has a large amount of preferred stock outstanding and significant ongoing dividend obligations. He pointed out that the company's financial burden is set to increase, with $6.7 billion in convertible notes maturing in 2027 and 2028. Thorn explained that Strategy's financing structure relies on the premise that it can continue to raise funds from the market. He argued that the controversial program to sell BTC could undermine the company's core investment thesis. However, Thorn suggested that Strategy needed to secure the option to sell BTC to prevent a temporary cash shortage from becoming an existential crisis. In the future, he added, the company must find ways to generate yield from its BTC holdings. Thorn concluded that amid a sluggish cryptocurrency market, Strategy's latest move will help it buy time until conditions improve. Late last month, Strategy announced the introduction of a new capital operating framework that includes adjustments to its reserve policy and STRC dividends, share buybacks, and the authorization to sell up to $1.25 billion in BTC.