Wall Street Q2: MSTR acquires $1.2 billion worth of shares...Strategic shift supported by STRC

Under the leadership of Michael Saylor, Strategy (formerly MicroStrategy) reportedly attracted significant capital from major Wall Street institutions in the second quarter, but analysis suggests that the company's capital allocation strategy has fundamentally changed since then. According to data released by Strategy on August 18, 12 out of the top 15 institutional shareholders increased their MSTR holdings as of June 30, resulting in a combined increase of $1.2 billion in their holdings. However, a closer look at the figures reveals that while the 12 buying institutions increased their holdings by approximately $1.3 billion, 3 institutions reduced their holdings by approximately $690 million, bringing the net increase among the top 15 institutions to only about $695 million. Key buyers included Goldman Sachs, which increased its holdings by approximately $470 million, and Capital International Investors, which increased its holdings by $346 million. Two entities related to BlackRock also increased their holdings by a combined total of over $170 million. Conversely, Capital Research Global Investors reduced its holdings by approximately $462 million, UBS Financial Services reduced its holdings by approximately $142 million, and Giordano Capital Management reduced its holdings by approximately $50 million. It is also noteworthy that for companies like Vanguard, BlackRock, and State Street, some of the purchases may have been driven by adjustments to benchmark allocations rather than active investment decisions, given their focus on passive and index-linked products. During that quarter, MSTR experienced extreme volatility, rising to $195 before plummeting to $86.93 at the end of June. The period of concentrated institutional buying coincided with the beginning of disruptions to Strategy's capital-raising structure. The preferred stock STRC, introduced as a supplementary funding source for additional Bitcoin purchases, fell to below $80, significantly below its par value of $100. While Strategy increased its annual dividend rate from 9% to 12% and increased the frequency of dividend payments to twice a month, and also expanded its dollar reserves, STRC remained below $95 this week. Consequently, the company shifted to directly purchasing STRC shares in the open market. In this process, Strategy began to reverse its previous flywheel, which focused on Bitcoin purchases. Over the past few weeks, the company has sold over $2 billion worth of MSTR shares and Bitcoin, while simultaneously repurchasing approximately $347 million worth of STRC shares, bringing its dollar reserves to $48 billion. This suggests that while institutions may have believed they were investing in a structure that supported Bitcoin accumulation, they were actually exposed to a different structure where capital was being allocated to support the preferred stock. Adding to the challenges, it has been reported that MSCI is considering a methodology to exclude non-operating companies with high asset ratios from global equity indices. Applying this financial ratio test to May data would include companies like Strategy, Metaplanet, and the uranium investment company Yellow Cake in the list of potential exclusions. Strategy's management estimates that this could result in selling pressure equivalent to up to 4% of MSTR shares.