MicroStrategy disclosed on October 19 that its discretionary USD cash holdings declined approximately 72% to $447.3 million as of October 18, down from $1.61 billion on August 30. The company attributed the decline to Bitcoin purchases and aggressive repurchases of its Variable Rate Series A Perpetual Stretch Preferred Stock (STRC).
During the week prior to the disclosure, MicroStrategy spent $193.1 million repurchasing nearly 1.94 million shares of STRC. The company also purchased $22.1 million worth of Bitcoin at an average price of $82,900, bringing its total Bitcoin holdings to 848,517 BTC accumulated for approximately $64.02 billion. MicroStrategy financed $22 million of the Bitcoin acquisition through the sale of 140,872 common shares.
Expanded Buyback Authorization
MicroStrategy's board increased its STRC repurchase authorization by 50% to $3 billion from $2 billion. The company has spent approximately $1.84 billion on STRC buybacks since beginning repurchases in July, leaving approximately $1.16 billion available under the new authorization.
Recent repurchases have averaged approximately $99.60 per share, representing a discount of just 0.4% from the stock's $100 stated value. In July, the company's initial repurchases averaged about $86.53 per share, securing a deeper discount of nearly 13.5%.
Cash Sustainability Concerns
At the current weekly repurchase pace of $193.1 million, MicroStrategy's remaining discretionary cash would fund approximately 2.3 weeks of buybacks. Sustaining the current repurchase pace would require either replenishing USD cash or identifying alternative funding sources.
The company's separate USD Reserve, designated primarily for dividend and debt-interest payments, stood at $4.83 billion after withdrawing $45.5 million for preferred-stock dividends.
Index Exclusion Risk
MicroStrategy faced additional pressure following MSCI's announcement on October 15 that companies classified as non-operating entities would become ineligible for its Global Investable Market Indexes. The changes could potentially affect MicroStrategy, with the final list of affected companies scheduled for November 11 ahead of implementation on November 30. MicroStrategy's common stock declined 11.35% over the five trading sessions ended October 16, falling from $154.34 to $136.83.
MicroStrategy is scheduled to report third-quarter earnings on October 29.
