Phong Le, Chief Executive Officer of Strategy Inc., recently confirmed the creation of a $1.4 billion cash reserve fund. This financial maneuver seeks to strengthen the firm’s Bitcoin treasury strategy, drastically reducing the immediate need to liquidate its digital holdings to cover obligations. The executive emphasized that asset sales would only occur under strict conditions and as a mathematical last resort.
The company has built a liquidity cushion designed to cover between 12 and 24 months of preferred dividends and interest payments. Management funded this pool primarily through the sale of stock, signaling a clear preference for equity dilution over asset sales. Currently, the company holds approximately 649,870 BTC, valued at nearly $59 billion. According to projections, this reserve ensures a minimum coverage of 21 months, establishing that sales would only occur if the multiple to net asset value (mNAV) falls below 1x.
Can this financial reserve truly shield digital assets from volatility?
This measure is relevant because it provides crucial stability in a market known for its unpredictable fluctuations. By establishing this fund, the company mitigates the risk of forced liquidations, acting as a protective shield for its treasury. Furthermore, they use an internal BTC rating to measure coverage, which indicates a 6.9x buffer over convertible debt at current prices. Even in a severe stress scenario with Bitcoin at $25,000, the assets-to-debt ratio would remain healthy at 2.0x, demonstrating resilience.
On the other hand, market sentiment has compressed the stock’s valuation multiple, reducing the mNAV premium from 3.2x to approximately 1.17x in December. This compression limits the ability of companies like Strategy Inc. to raise capital on favorable terms. Likewise, bank analysts have warned about the risk of exclusion from MSCI indexes, which could trigger passive outflows estimated between $2.8 billion and $8.8 billion. However, strong governance makes a forced asset sale unlikely.
The divergence of opinions underscores the uncertainty about how index mechanics will affect the company’s stance. Some market observers counter that operating cash flow is sufficient to sustain the current structure. It is vital to understand that share price volatility coincides with mNAV reduction, making this threshold a more binding constraint for corporate administration in the short term.
The cash reserve significantly extends the operational runway, guaranteeing dividend payments without touching the Bitcoin treasury. Therefore, attention will now focus on monitoring whether the mNAV remains above the critical 1x threshold. The future will depend on how passive flows interact with this unconventional corporate posture and whether index exclusions materialize in the coming quarters.
