- Saylor responded to critics questioning Strategy’s ability to sustain its dividend payments.
- Strategy’s Executive Chairman said the company’s Bitcoin holdings only need to appreciate 3.3% annually to fund dividend payments indefinitely.
Michael Saylor, Co-Founder and Executive Chairman of Strategy, is coming to his company’s defense. It comes amid growing negative sentiment over the business’s pivot from its promise to never sell any of its BTC reserves to becoming an active seller to fund dividend payments.
The exec claimed that most critics have grossly misunderstood Strategy’s BTC Breakeven ARR (Annual Return Rate). He also stated that the company only needs to maintain a specific gain threshold annually to sustain its dividend obligations.
Where is the Flak Coming From?
Strategy recently unveiled its Digital Credit Capital Framework, which aims to reinforce its preferred securities, cash reserves, and Bitcoin strategy. However, one of its components is allowing the company to sell BTC at its discretion to build cash reserves, pay dividends, settle interest on preferred shares, and fund share repurchases.
The move was a clear sign that it’s selling a significant chunk of its holdings, potentially more than the strategic 32 BTC sale it executed in early June. Then, it did just that over the past week, offloading a total of 3,588 BTC for around $216 million.
Pundits slammed Strategy and Saylor for selling their BTC holdings way below the company’s average purchase price of $75,476 per coin. Additionally, they questioned the business’s capability to keep up with its high dividend payments, especially given the STRC preferred share’s increase to a 12% dividend rate in July.
Only 3.3% Price Appreciation Annually Needed for Strategy’s Bitcoin Holdings
Saylor indicated that critics tend to overlook or misunderstand Strategy’s BTC Breakeven ARR metric. According to the company’s definition, the variable represents the assumed annualized rate of return on Bitcoin expressed as a percentage.
It uses the formula:
BTC Breakeven ARR = Annual Preferred Dividends / Total Value of BTC Reserves
As of Wednesday morning (UTC), Strategy maintains a BTC Breakeven ARR of 3.33%. The figures are based on its annual dividends of $1.763 billion and BTC reserve worth $52.87 billion at the prevailing exchange rate of $62,658 per BTC.
Saylor emphasized that as long as Strategy’s BTC holdings appreciate faster than 3.3% over time, its BTC capital gains can fund dividends indefinitely, including STRC.
However, resident Bitcoin critic Peter Schiff, Chair of SchiffGold, objected to Saylor’s projection. The veteran gold investor pointed out that Strategy’s computation assumes that dividend payments don’t increase over time.
People quickly clapped back at Schiff’s comments, though. They argued that he’s ignoring the fact that Strategy’s dividend obligation increases only if it buys more Bitcoin, which is actually the nature of the company in the first place.
Furthermore, others noted that Bitcoin’s historical annualized return has vastly outperformed Saylor’s conservative 3.3% benchmark. Hence, it can handle future attempts to scale up dividend obligations.
