TD Cowen reduced the target price for Strategy on the grounds that bitcoin continued to be weak, placing the company ' s valuation at the centre of its strategy of holding bitcoin. At the same time, however, the investment bank stated that the capital management framework issued this week by Strategy had helped to improve cash movement capacity and ease investor concerns about its priority share costs and liquidity.
The bank analyst reduced the target price of Strategy from $400 to $260 and reduced the price of bitcoin at year-end from $1.44 million to $0.10 million. The report states that this adjustment mainly reflects the recent weak performance of bitcoin rather than the new capital arrangements that the company has disclosed this week.
Bitcoin backsliding valuation
By Tuesday, bitcoin had fallen by $60,000. According to the figures, the price was about $5.84 million, a decline of more than 20 per cent over the past month, more than 53 per cent above the historical high of $126,000 last October.
Against this background, Strategy, as a highly leveraged currency holding company, is more vulnerable to bitcoin fluctuations in stock prices and market expectations. TD Cowen therefore reduced the target price but did not negate the corporate capital framework as a whole.
25.50 billion dollars in cash reserves as a focus
This week, Strategy launched Digital Credit Capital Framewok, clarifying how the company will follow up on the management of cash reserves, flagship priority stock products and 847,363 bitcoin holding warehouses. At the same time, the company ' s cash reserves increased to $25.5 billion.
In the opinion of analysts, this adjustment would be helpful both for credit profile and for capital flexibility. Especially in the face of market concerns about the continued rise in the costs of STRC, more cash reserves can help to increase the ability of companies to cope with the long-term decline in bitcoin.
It is mentioned that the STRC dividend rate has been increased to 12 per cent for the eighth Monday, which means that Strategy ' s recurrent expenditure continues to increase. STRC dropped by 0.7 to 83.11 per cent on Tuesday, still below $100 in nominal value, before falling to a historical low of $71.25 a week.
Bitcoin's sale mechanism has been formally incorporated
TD Cowen also mentioned that for the first time the new Strategy framework had more clearly linked cash reserve management, priority stock-sharing adjustments and possible future sale of bitcoin. The analysts believe that this is a good thing for price stability in priority shares and for investor confidence.
Under the new arrangement, Strategy could sell up to $1.25 billion bitcoin to replenish the cash reserve. This means that bitcoin is not only a long-term hold on the balance sheet but is also formally included in the financing instruments available to companies.
In addition, Strategy acquired the capacity to repurchase $1 billion in general and $1 billion in priority shares. According to TD Cowen, this indicates that the company's capital allocation has begun to shift to “two-way operations” and may in the future provide more pricing and adjustment space for the market.
Earlier this month, Strategy had sold 32 bitcoins, cashing approximately $2.5 million. Although the company described this at the time as an arrangement to support priority equity holders, the market remained vigilant about whether more bitcoin sales would occur in the future.