TLDR
- Strategy (MSTR) plans to use preferred stock instead of common shares to fund future Bitcoin acquisitions
- The company’s STRC preferred stock hit $100 par value Wednesday, allowing Strategy to resume new offerings
- STRC provides 11.25% annual dividend paid monthly to attract yield-focused investors
- CEO Phong Le ruled out buying competing Bitcoin treasury firms despite some trading below asset values
- Strategy common stock declined 5% to $126.14 as Bitcoin traded near $67,500
Strategy (MSTR) is changing how it funds Bitcoin purchases. CEO Phong Le announced Wednesday the company will prioritize preferred stock over common shares moving forward.
“We will start to transition from equity capital to preferred capital,” Le told Bloomberg. The shift protects common shareholders from dilution while enabling continued Bitcoin accumulation.
The announcement came as Strategy’s perpetual preferred stock Stretch (STRC) reclaimed its $100 par value. This marked the first time STRC traded at that level since mid-January.
STRC had dropped to $93 earlier this month when Bitcoin fell below $60,000. The preferred stock’s recovery matters because Strategy won’t issue new shares below the $100 threshold.
Preferred Stock Offers High Yield
STRC delivers an 11.25% annual dividend distributed monthly. Strategy adjusts this rate monthly to keep the preferred stock trading near par value.
Le admitted the preferred offering needs more marketing effort. “Throughout the course of this year, we expect Stretch to be a big product for us,” he said.
The preferred structure targets investors wanting stable income without Bitcoin’s wild price swings. It represents Strategy’s fourth perpetual preferred offering since launching the approach last July.
With STRC back at par, Strategy can now conduct at-the-market offerings. These sales generate cash for Bitcoin purchases without issuing dilutive common stock.
No Plans to Buy Rivals
Le dismissed speculation about acquiring other Bitcoin treasury companies. Some analysts suggested buying undervalued competitors could provide cheap Bitcoin access.
“I think it would be a distraction to go buy, at a discount to net asset value, another digital asset treasury company,” Le explained.
He compared the situation to emerging sectors like electric vehicles and artificial intelligence. “You want to focus on your core product,” Le said.
The Bitcoin treasury space has grown crowded recently. Multiple firms now compete for the same investor base interested in corporate Bitcoin exposure.
Some companies hold more Bitcoin than their market caps suggest they’re worth. This creates potential acquisition targets trading below net asset value.
Strategy remains the largest corporate Bitcoin holder globally. The company maintains regular purchasing despite cryptocurrency market volatility.
Market Performance
Bitcoin traded around $67,500 Wednesday after touching above $68,000 earlier in the session. The cryptocurrency has moved sideways over the past 24 hours.
Strategy common stock fell 5% to close at $126.14 Wednesday. The decline occurred despite positive news about STRC reaching par value.
STRC last traded at $100 on January 16 when Bitcoin was near $97,000. The preferred stock bottomed at $93 on February 5 as Bitcoin crashed to $60,000 before this week’s rebound.
Strategy recently increased STRC’s dividend to the current 11.25% rate. This adjustment aims to reduce volatility and keep the preferred stock stable near its $100 par value.
