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Strategy raises $2 billion, builds $1.59 billion cash pool as Michael Saylor pauses Bitcoin buying
Strategy raises $2 billion and builds a $1.59 billion cash pool as Michael Saylor's firm pauses Bitcoin buying amid pressure on its financing model.
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Strategy has raised about $2 billion in fresh cash by selling common shares over the past week. The company is building a larger cash buffer as its Bitcoin-focused financing strategy faces pressure.
The company has created a new “USD Cash” pool worth $1.59 billion. Strategy said this cash will sit alongside its existing reserve and give the company more financial flexibility, according to Bloomberg.
Strategy's $1.59 billion cash pool
Strategy can use the $1.59 billion cash for several purposes. The money can be used to:
- Buy more Bitcoin
- Pay dividends on preferred shares
- Make debt payments
- Buy back securities
- Meet other corporate expenses
Also read: Why is crypto suddenly rallying? Bitcoin jumps 20% as $2.7 billion short squeeze hits
The move gives Strategy a major cash cushion instead of immediately putting all the new money into Bitcoin. The company has not announced a new Bitcoin purchase alongside the fundraising.
Strategy pauses Bitcoin buying
Strategy has paused its Bitcoin buying. The company has not purchased Bitcoin since the seven-day period that ended June 22. Strategy also did not buy or sell any Bitcoin in the latest week. A company filing on Monday showed that there was no change in its Bitcoin holdings during the week that ended Sunday.
The company raised around $2 billion through common-stock sales. This is separate from its existing cash reserve and has helped Strategy build up more funds that can be used when needed, according to Bloomberg.
Strategy's original reserve now stands at about $5.1 billion. The company had previously maintained this reserve as part of its financial strategy. Strategy also bought back $136.4 million of its Stretch preferred shares. The repurchase gives the company another way to manage its securities and capital structure.
Bitcoin financing model under pressure
The move comes as Strategy's famous Bitcoin financing model faces pressure. The company has historically used its stock and other securities to raise money and then buy more Bitcoin. But that strategy becomes harder to repeat when the premium investors are willing to pay for Strategy shares falls.
Strategy's valuation premium remains well below earlier levels. This means the gap between the value investors place on Strategy and the value of its underlying Bitcoin holdings is not as large as it was during the earlier part of the Bitcoin rally.
The financing “flywheel” is therefore not working as strongly as before. Strategy's model depends heavily on being able to raise capital at attractive valuations, which can then be used to buy more Bitcoin.
Bitcoin price nears $80,000
Bitcoin's recent rally still helped Strategy's securities. Strategy's shares and debt securities gained last week as Bitcoin moved toward $80,000, according to Bloomberg. Despite the Bitcoin rally, Strategy chose to build cash rather than immediately add more Bitcoin.
The new $1.59 billion cash pool gives the company more room to respond to market conditions and meet its financial obligations. Strategy shares rose about 2% in premarket trading on Monday. Investors appeared to react positively to the company's stronger cash position and added financial flexibility.
