MicroStrategy's Preferred Stock Falls Amid Bitcoin Acquisitions
Quick Look
- MicroStrategy's perpetual preferred stock (STRC) dropped to near record lows as investors reacted negatively to the company's recent Bitcoin acquisitions.
- Analysts suggest the market prefers the company use cash for dividends rather than buying more BTC, viewing the acquisitions as an unsustainable path.
AI-generated summary
Why It Matters
MicroStrategy's perpetual preferred stock (STRC) is designed to yield 11.5% at a par value of $100. The company recently acquired more Bitcoin, bringing its total holdings to 846,842 BTC.
Strategy’s perpetual preferred stock STRC fell near record lows on Tuesday as investors seemingly balked at the company’s latest Bitcoin acquisitions.
Michael Saylor’s variable-rate perpetual “Stretch” Bitcoin yield product declined by 3.58% to $91.79 on Tuesday, 8.2% below its target value of $100. Markus Thielen, CEO of 10x Research, said the dip is linked to Strategy’s recent Bitcoin buying.
“The market would rather see MicroStrategy [Strategy] not acquiring more BTC and rather keep the cash for dividend payments,” Thielen told Cointelegraph. “It appears traders are seeing the latest BTC acquisition as an unsustainable path for STRC.”
Stretch is designed to return a dividend of 11.5%, trading at a par value of $100, but the current effective yield, now that the shares have dipped, is 12.5%. This means the firm may need the cash to support the yield rather than spending it to buy more BTC.
On Monday, Strategy said it acquired 1,587 Bitcoin for around $100 million last week. The week before, it purchased 1,550 BTC, also for about $100 million. The combined purchases brought its holdings to 846,842 Bitcoin.
Risk-off sentiment and pressure from competitors
Nick Ruck, director of LVRG Research, told Cointelegraph that “broader risk-off sentiment in crypto markets has weighed on investor appetite.”
“While the variable dividend delivers an effective yield above 12% to anchor the perpetual preferred near its $100 par value, persistent selling pressure and concerns over Strategy’s expanding capital structure and ATM issuance appear to be testing that resilience in the near term,” he added.
Related: Strategy’s Saylor signals BTC buy as preferred dividend pay date vote looms
The company’s stock (MSTR) has also taken a hit this week, dropping 6.35% on Tuesday to end the day at $122.81, down 67% over the past 12 months.
Meanwhile, Stretch is also facing stiff competition from the Strive perpetual variable-rate preferred shares (SATA), which are trading at $100 and offering an effective yield of about 13%.
BTC variable-rate perps compared. Source: BitcoinQuant
What to Watch
AI outlook — possibilities, not facts
STRC stock may continue to trade below par value in the short term.
Likely · Within weeks
MicroStrategy may face pressure to prioritize dividends over Bitcoin acquisitions.
Likely · Within months
Open Questions
- Will MicroStrategy adjust its Bitcoin acquisition strategy?
- Can STRC recover its par value?
- What is the long-term impact on MSTR stock?
