Strategy’s $13,400 Bitcoin floor reveals loss order in its debt structure

Strategy, a company holding Bitcoin as a treasury asset, has set a $13,400 Bitcoin price level as a reference point for its STRC preferred stock coverage. This level, called the “BTC Floor,” is where the company’s illustrative coverage ratio for STRC reaches 1.0x, according to a recent SEC filing.

The $13,400 figure does not guarantee recovery or solvency for STRC holders. Instead, it reflects a calculation based on Strategy’s Bitcoin reserves and its counted liabilities. The ratio can change before Bitcoin reaches this price due to shifts in cash use or adjustments in counted claims.

How the floor is calculated

Strategy’s $13,400 floor is derived from dividing the company’s covered notional by its Bitcoin holdings. The covered notional includes $6.714 billion in debt, minus $6.69 billion in USD assets, plus $1.284 billion in senior STRF and $9.972 billion in STRC. With 840,447 Bitcoin, this results in a floor of roughly $13,400.

Changes in USD assets can move this threshold. For example, depleting the $1.59 billion USD Cash pool without reducing debt could raise the floor to about $15,313. If all $6.69 billion in USD assets were used without retiring any claims, the floor could rise to around $21,381.

Who bears the losses first

In times of financial stress, Strategy’s decisions on cash use, Bitcoin sales, or share repurchases determine who absorbs losses first. In a recent week, Strategy sold 18.26 million MSTR shares for $2.0065 billion, using the proceeds to repurchase STRC shares, add to reserves, and increase cash. This dilution primarily affected MSTR holders.

In a restructuring, creditors, subsidiary liabilities, and senior preferred stock (STRF) rank above STRC. Junior preferred stock and MSTR common stock rank below it. The $13,400 floor is based on a specific set of assets and claims, but earlier pressure points include cash availability and discretionary spending choices.

What is confirmed

• Strategy’s $13,400 Bitcoin floor marks the price at which its STRC coverage ratio reaches 1.0x.
• The floor is illustrative and does not guarantee recovery or solvency for STRC holders.
• USD asset levels and counted claims can shift the threshold before Bitcoin reaches $13,400.
• In a restructuring, creditors and senior preferred stock rank above STRC, while junior preferred and MSTR common rank below.

Why it matters

The $13,400 floor highlights how Strategy’s financial structure prioritizes losses among its stakeholders. Cash use, dividend timing, and legal priority determine who absorbs stress first, with MSTR holders currently bearing dilution costs from share sales.

Sources

• CryptoSlate