Strategy (MSTR) Stock Drops 5% as Company Unveils New Funding Strategy

TLDR

• Strategy (MSTR) CEO Phong Le says the company will transition from common stock sales to preferred stock offerings to fund Bitcoin purchases
• Strategy’s perpetual preferred stock STRC reclaimed its $100 par value Wednesday for the first time since mid-January, enabling resumed at-the-market offerings
• STRC offers an 11.25% annual dividend paid monthly, recently increased from previous rates to incentivize trading near par value
• Le dismissed the idea of acquiring underperforming Bitcoin treasury rivals, calling such moves a distraction from core business
• Strategy common shares dropped 5% Wednesday to $126.14 while Bitcoin traded around $67,500

Strategy (MSTR) is shifting its funding approach for Bitcoin acquisitions. The company plans to rely more heavily on preferred stock sales instead of issuing common shares that dilute stockholder value.

The move centers on Strategy’s perpetual preferred stock called Stretch (STRC). The company launched STRC in July as its fourth perpetual preferred offering.

STRC hit a key milestone Wednesday. The preferred stock reclaimed its $100 par value for the first time since mid-January.

STRC Recovery Unlocks New Funding

The preferred stock had fallen below $94 earlier this month. That decline came as Bitcoin crashed under $60,000 in early February.

Now trading at par, Strategy can resume at-the-market offerings. These sales will fund additional Bitcoin purchases without diluting common shareholders.

STRC offers an annual dividend of 11.25%, paid monthly. Strategy recently increased this rate to keep the preferred stock trading near its $100 par value.

The preferred stock structure appeals to investors seeking steady income. It provides an alternative to common stock for investors uncomfortable with Bitcoin’s volatility.

No Interest in Acquiring Rivals

Le pushed back on speculation that Strategy might acquire underperforming Bitcoin treasury companies. Some analysts suggested such deals could let firms buy Bitcoin at a discount.

The crypto treasury space has become increasingly crowded. Multiple companies now compete for investor attention in this narrow market segment.

Some Bitcoin treasury firms trade below their net asset value. Their market caps fall short of the actual Bitcoin they hold.

Strategy remains the world’s largest corporate Bitcoin holder. The company continues purchasing Bitcoin regularly despite market volatility.

Bitcoin traded around $67,500 Wednesday after reaching an intraday high above $68,000. The cryptocurrency has remained relatively flat over the past 24 hours.

Strategy Inc, MSTR

Strategy’s common stock fell 5% Wednesday to close at $126.14. The decline came despite STRC’s recovery to par value.

STRC last traded at $100 on January 16 when Bitcoin hovered near $97,000. The preferred stock dropped to $93 as Bitcoin fell to $60,000 on February 5 before rebounding this week.

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