Svmuu News JPMorgan Chase Analysts note that Michael Saylor’s Strategy recently officially launched a policy to sell Bitcoin, transforming the company from a pure BTC buyer into a potential seller and introducing “avoidable two-way risk” to the crypto market.
Strategy’s Bitcoin sale policy, titled the “BTC Monetization Program,” allows the company to sell Bitcoin to raise up to $1.25 billion in cash reserves. These funds will be used to pay preferred stock dividends and interest expenses, or to repurchase preferred and common stock in order to optimize the capital structure.
JPMorgan ChaseIt is believed that if Strategy were to sell BTC in the future, it would increase market uncertainty and volatility regarding the price of Bitcoin. Analysts note that this risk could have been avoided if the company had instead chosen to replenish its reserves for future dividend payments by issuing equity.
Strategy has currently set a minimum cash reserve target to cover 12 months of preferred stock dividends and interest expenses; its current cash reserves of $2.55 billion are sufficient to cover approximately 17 months of dividends.JPMorgan Chase believes the company should increase its cash reserves to cover 24 to 36 months of related obligations. Even if this were to cause common stock to trade at a discount to its net asset value, it would reassure investors that the company would not be forced to sell Bitcoin in the short term.