Disclaimer: The analyst who wrote this article owns shares in Strategy.
Strategy’s New Preferred Stock Issuance
Strategy (MSTR), led by Executive Chairman Michael Saylor, has completed its largest preferred stock issuance with the introduction of STRC (Stretch), joining STRD, STRF, and STRK preferred shares to enhance the company’s credit yield curve.
Details of the STRC Offering
STRC is ranked high in seniority and is characterized by low expected volatility, providing a new short-duration layer to Strategy’s financing options and diversifying capital-raising methods for BTC acquisition.
According to a Fidelity alert on X, the STRC deal comprises 28 million shares priced at $90 each, totaling over $2.52 billion. This marks a significant escalation from the initial $500 million target announced just days earlier, highlighting the company’s ambitious strategy to expand its bitcoin (BTC) holdings.
Features of the STRC Stock
STRC represents a senior, perpetual preferred stock offering a monthly variable dividend, appealing to yield-seeking investors desiring stability near par value. During the offering, STRC had an effective yield of 9.5%–10.0% paid monthly. The features designed to maintain a stable trading range include adjustable dividend rates, secondary issuance windows, and call options above par.
If STRC trades below $99, dividend increases can be paused; conversely, new shares may be issued or stock called if it rises above $101. These mechanisms aim to foster market stability while providing attractive returns in the current interest-rate environment, with any reductions in dividend capped at 25 basis points alongside the maximum drop in the one-month secured overnight financing rate (SOFR) during the period.
Competitive Edge of STRC
In comparison to traditional short-duration credit options, STRC distinguishes itself by offering more than double the 4% return available from money market funds and Treasury bills. It targets investors seeking higher yields without significant price volatility, placing it favorably against conventional instruments like commercial paper and bank deposits.
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