Why Lyn Alden Says Strategy Let Its Dollar Reserve Slip Too Far

Summary

Laura Shin and Lyn Alden discuss the criticism around Strategy's capital structure, the breakdown of its USD reserve guidance, and the subsequent volatility event in STRC. Alden argues the company's main mistake was letting the dollar reserve fall too low, damaging investor trust. She evaluates the new board-level reserve rule and buyback authorizations, suggesting rebuilding the reserve and potentially buying back STRC are sensible steps while the market regains confidence.

• Strategy (formerly MicroStrategy) faced criticism for complicating its capital structure and allowing its USD reserve to fall below its two-to-three-year guidance, dipping as low as six months of preferred dividends.
• The reserve shortfall, combined with leverage built on top of STRC, triggered a powerful volatility event that spooked investors and hurt trust in management's judgment.
• The company has since set a new board-level policy to keep the reserve above 12 months, authorized buybacks for preferreds (with emphasis on STRC) and common stock, and begun rebuilding the dollar reserve to around 22 months.
• Lyn Alden views these recent corrective steps as about as ideal as possible, though notes the ideal would have been never letting the reserve fall so low in the first place.
• She sees the buyback of STRC in the 80s as an option that can make sense, but believes the best near-term approach is a wait-and-see strategy while the market assesses the credibility of the new guidance.
• Alden notes that the market is currently pricing STRC at a higher risk and requiring a higher yield, and that MNAVs are compressed because the broader environment is still a Bitcoin bear market.