Alex Thorn, head of firmwide research at Galaxy Research, shared Galaxy’s analysis on X, entering the debate over Strategy’s newly announced Digital Credit Capital Framework.

The framework has prompted discussion over whether the new rules address Strategy’s capital-structure challenges or mainly give the company more time to manage them. The debate centers on how a Bitcoin-heavy balance sheet can meet recurring cash obligations, including preferred dividends and debt interest, without undermining the company’s stated long-term Bitcoin strategy.

Strategy’s new capital framework

Strategy (Nasdaq: MSTR) recently disclosed its “Digital Credit Capital Framework” in an 8-K regulatory filing. Cryptopolitan reported that the framework gives the company formal authorization to sell up to $1.25 billion worth of Bitcoin.

The company is also carrying a large unrealized loss of roughly $14 billion on its holdings of 847,363 BTC. Against that backdrop, the framework establishes a formal USD reserve policy, introduces revised dividend terms for Strategy’s STRC preferred shares, and authorizes separate repurchase programs of $1 billion each for both preferred stock and MSTR common shares.

Strategy’s board has set aside the company’s $2.55 billion cash reserve and limited its use to preferred dividends and debt interest. If current spending levels of about $1.76 billion per year continue, that reserve would last around 17 months.

If Strategy were to execute the full authorized Bitcoin sale, total liquidity would increase to about $3.8 billion. That amount would cover roughly 26 months of obligations at the same spending rate.

Thorn said the central question is whether the framework actually resolves Strategy’s capital-structure issues or simply postpones them. The company sold 32 BTC for approximately $2.5 million in late May, marking its first-ever Bitcoin sale, to cover a dividend payment. That sale made the question of Bitcoin monetization more immediate, because it showed that Strategy’s reserve asset could be used directly to satisfy cash requirements.

JPMorgan has recommended that Strategy raise money by selling its shares rather than selling Bitcoin.

MSTR and STRC market moves

MSTR shares rose 12.6% to $92.68 on the Monday after the filing was disclosed. By Wednesday, the stock had climbed above $100, representing a 27% increase from the prior Friday’s close.

Strategy’s STRC preferred shares also moved higher, closing at $87.87 on July 3.

Benchmark Equity Research viewed the framework positively. The firm maintained its Buy rating on MSTR and set a price target of $570.

Strategy executives, including Chairman Michael Saylor, have said the changes are intended to strengthen the company’s credit position. Saylor said that “digital credit requires liquidity, discipline, and active capital management.”

Strive, another company pursuing a Bitcoin-backed capital structure, told investors on July 2 that they should not assume the company will automatically issue new shares of its SATA preferred stock at the $100 par value, citing abnormal market conditions. The comparison is relevant because both companies are testing structures in which Bitcoin holdings, preferred equity, and market access interact with investor demand and short-selling pressure.

Strive Chief Risk Officer Jeff Walton shared figures showing that short interest in SATA increased by about 1 million shares over the 30 days through June 30. Borrow costs rose from 6.1% to 68.6% APR over the same period.