Strategy Inc. is doubling down on Bitcoin. The move is aimed at calming investors while the company continues to buy crypto assets that are core to its identity. The shift is reportedly focused on expanding its line of perpetual preferred stock, which trades near $100 and pays a monthly reset dividend.
Preferred stocks that fix volatility
The stretch, often denoted as STRC, is now at the center of that plan. According to Strategy’s own listing, STRC currently has an annual dividend reset of 11.25% and is structured such that its price tends to trade near its $100 par value.
Strategy CEO Von Leh reportedly told Bloomberg that the company plans to rely on preferred capital rather than common stock to finance future Bitcoin purchases.
Relentless purchasing attitude
Michael Saylor, the company’s chairman of the board, has been upfront about holdings and acquisitions. Based on the report, Saylor asserted that the company has no intention of selling its Bitcoin holdings, even if the price drops significantly, and that Strategy plans to continue purchasing them on a quarterly basis. This comment is intended to reassure holders who have watched the stock price move as Bitcoin fluctuates.
Financing that allows you to purchase Bitcoin without affecting the stock price
The logic here is simple. Rather than selling common stock or liquidating holdings, it issues preferred stock that appeals to income-seeking investors and uses the proceeds to buy more Bitcoin.
Stretch is being marketed as a way for investors to gain exposure while avoiding the same wild swings that hit Strategy’s common stock. Some market watchers argue that this shifts risk to preferred holders, and critics in the financial press have been vocal about the idea of promoting stability through yield products.
Bitcoin amount and its meaning
The report points out that the Bitcoin stack disclosed by Strategy remains huge, numbering in the hundreds of thousands of coins, and executives point out that returns will be long-term.
The company’s approach makes its balance sheet look more like a crypto fund than a traditional software concern, raising questions about how investors should value stocks relative to their underlying assets.
Key points and market signals for investors
Investors looking for cash yield without direct exposure to cryptocurrencies may find preferred stocks attractive. At the same time, preferred stocks come with their own risks. Dividends can be reset, and the company’s obligations on preferred stock compete with the need to manage leverage and reserves.
Featured image from Unsplash, chart from TradingView
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