Adam Hejl
3 min read
What Happened?
Shares of bitcoin development company Strategy (NASDAQ:MSTR) fell 5.6% in the afternoon session after a sharp jump in benchmark Treasury yields and surging crude oil prices stoked renewed concerns over inflation.
Global bond yields climbed as elevated oil prices fueled concern that the Federal Reserve may need to lift rates, Bloomberg reported. The 10-year U.S. Treasury yield moved to a 20-month high near 4.79% after U.S.-Iran strikes around the Strait of Hormuz, according to CNBC. Because many SaaS valuations rest on cash flows expected far in the future, a higher long-end yield lifts the discount rate on those earnings; the oil spike reinforces the case that borrowing costs may stay elevated for longer.
The shares closed the day at $125.07, down 5.6% from the previous close.
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What Is The Market Telling Us
Strategy’s shares are extremely volatile and have had 60 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 8 days ago when the stock gained 4.8% on the news that the company disclosed the establishment of a $1.59 billion liquidity pool and raised $2.01 billion through equity sales to bolster its cash reserves. The company announced, in a regulatory filing, the creation of “USD Cash,” a flexible liquidity component within its Digital Credit Capital Framework. The pool was funded by selling approximately 18.26 million Class A common shares through an at-the-market offering program. Strategy allocated $1.59 billion of the net proceeds to the new USD Cash account, $300 million to expand its USD Reserve to $5.10 billion, and $136.4 million to repurchase shares of its perpetual preferred stock.
The designated cash pool provides management with flexible capital for general treasury operations, including potential bitcoin purchases, debt service, preferred stock dividends, and share repurchases. The move brought the company’s total dollar liquidity to approximately $6.69 billion.Crucially, the stock’s rally was heavily accelerated by the underlying asset, as spot Bitcoin prices surged past $78,000 per CoinMarketCap.com. This explosive crypto market rebound pushed Bitcoin well above Strategy’s average purchase price of $75,385 per coin for its 840,447 Bitcoin treasury holding, instantly flipping a multibillion-dollar paper loss into an unrealized profit of over $1.4 billion and reaffirming the market’s appetite for the company’s leveraged proxy strategy.
