Michael Saylor’s BTC company Strategy told investors that its STRC share buybacks would “taper” as STRC neared $100 per share. However, instead of tapering, the company spent an all-time record amount of cash last week on buybacks within 0.4% of STRC’s $100 par value.
STRC has traded as low as $71.25 this year, but Strategy didn’t buy back any shares that week. It was even too timid to buy back in the $80s and low $90s.
Finally, after STRC rallied 98.6% of the way back to its intended $100 stock price, and despite its written guidance to “to taper [repurchases] as STRC approaches a trading price of $100 per share,” Strategy plowed more cash than ever into STRC.
Specifically, the company disclosed spending $193.1 million last week at an average price of $99.60, and raised its STRC buyback authorization to $3 billion from $2 billion in the same SEC filing.
Strategy funded the latest buybacks from a dwindling pile of so-called “USD Cash,” which is different from the company’s total cash.
Put simply, all of Strategy’s piles of cash are dwindling and as they deplete, the company mostly replenishes them by diluting common shareholders of the company, issuing and selling more shares of MSTR to raise more cash.
To be precise, it also infrequently sells tiny amounts of BTC, and generates small amounts of revenue from software sales.
Unlike STRC, the supply of MSTR has only ever gone up this year. The lion’s share of the cash comes from MSTR dilution.
Read more: No amount of cash can fix STRC’s trust problem
Strategy forecasted it would taper, then did the opposite
The July guidance was very clear: Strategy would reduce, not increase, its share repurchases as STRC approached its $100 par value.
CEO Phong Le said it intended to buy “more at deeper discounts and less as the STRC trading price approaches $100 per share.”
In contrast, weekly filings trace a steepening, not tapering, curve.
Strategy bought about $25 million of STRC in the week of July 20 at an average $86.53 per share. By the week ending October 18, it was spending 7.7 times as much at $13 per share higher.
The two largest weeks of STRC buybacks came in October when STRC was near its highest price of the year.
The company spent $192.4 million at $99.58 in the week to October 11, then topped that by spending $193.1 million at $99.60 per share last week.
Strategy critic Derin Olenik wrote, “Yet another $193.1 million spent on buybacks near $100 (largest week to date), accounting for 19.5% of total volume.”
Since July, Strategy has used $1.84 billion worth of cash to repurchase STRC. Common MSTR shareholders provided almost all of that cash, experiencing dilution as a direct consequence, in addition to some small bitcoin (BTC) sales.
Thanks to common shareholders, the company retired 18.9 million shares with $1.89 billion of stated (par) value.
The next weekly filing about any STRC repurchases should land Monday, October 26. Two days later, shareholders will meet to vote on daily dividend frequency for STRC and the company’s other dividend-paying stocks.
On October 29, Strategy reports third quarter financials.
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