Author: Tao Zhu, Jinse Finance

Abstract: On May 29, STRC once fell to $97.11 before rebounding to close at $98.57. Since then, STRC has been trending downwards, currently trading at $94.65. For a preferred stock designed to trade around its $100 par value long-term, this decline has certainly attracted market attention.

I. What is STRC?

According to Strategy's official website, Stretch (STRC) is Strategy's perpetual preferred stock with a current annual dividend yield of 11.50%, paid monthly in cash. STRC's dividend yield is adjusted monthly to encourage the stock price to trade around its par value of $100 and reduce price volatility. STRC is listed on Nasdaq and can be traded on most major brokerage platforms.

"Preferred" refers to the higher priority that preferred stock has over common stock in dividends and liquidation. STRC, as preferred stock issued by Strategy, ranks below bonds but above common stock. Specifically, the "preferred" nature of preferred stock manifests in two ways. First, preferred shareholders receive dividends first, and when profits are insufficient, they also receive priority in compensation. Second, in the event of company bankruptcy, preferred shareholders have priority in receiving compensation; unlike common shareholders who may not receive their principal back at all, preferred shareholders may recover a portion of their principal.

STRC is essentially more like a "high-yield cash flow product" than a growth stock that pursues capital appreciation. Many investors buy STRC primarily to obtain a return of over 11%, rather than focusing on whether the stock price will rise.

II. Why has the STRC recently deviated from its anchor?

1. BTC price drops

Strategy's largest asset is Bitcoin, which is highly correlated with the price of BTC. In late May, the crypto market as a whole experienced a significant correction: the price of BTC has fallen from a monthly high of nearly $82,000 to around $64,300 as of press time, a drop of 21.59%.

The rapid decline in BTC from its highs led to a sell-off in risk assets, putting pressure on Strategy-related products as well.

2. Pressure from competitors

Another Bitcoin asset management firm, Strive Asset Management (ASST), has taken a different approach. The company recently announced that its perpetual preferred securities, SATA, will pay daily dividends. Over the past two weeks, SATA's price has remained stable near its par value of $100, and even amidst falling Bitcoin prices, its dividend yield has remained around 13%.

Over the past three months, Strive's stock price has risen by approximately 110%, while MSTR has only increased by 12%, and Bitcoin by just 8%. This divergence suggests that investors may prefer Strive's more robust balance sheet and higher-yielding preferred stock structure.

Note: Strive was originally an asset management company founded in 2022 and headquartered in Dallas, Texas, USA. Initially, it primarily issued ETFs and was known for its "shareholder value maximization" philosophy. Starting in 2025, Strive underwent a major transformation, beginning to emulate Strategy's model—becoming a Bitcoin reserve company and issuing preferred stock.

Perhaps inspired by Strive's daily dividend payout, Strategy has announced a proposal to change STRC's dividend payout frequency from once a month to twice a month. If approved and adopted, this proposal is expected to shorten reinvestment lag, enhance liquidity and market efficiency, and improve price stability.

The proposal requires a vote from both MSTR and STRC shareholders, and it will only pass if both classes vote in favor. According to the proposal timeline, voting began on April 28 and will conclude on the meeting day, June 8. If the proposal is approved, the initial record date under the new schedule will be June 30, and the initial dividend payment date will be July 15. Eligible shareholders must have held shares before April 17.

3. Technical sell-off

Strategy hopes that STRC will remain around $100 in the long term. If the price of STRC falls below $100, many quantitative funds believe the market is questioning the product's pricing mechanism. This could lead to issues such as passive position reductions, technical stop-loss orders, and the exit of arbitrage funds, potentially causing a further decline.

III. Is there a risk of default for STRC?

There is currently no obvious risk of default.

First, investors had previously been concerned about whether Strategy would ultimately sell Bitcoin to pay off debt or pay dividends, or whether it would continue to use the funds raised from the securities offering to expand its Bitcoin holdings. Saylor responded on X: "Work is going well."

On June 1, Strategy founder Michael Saylor confirmed that the dividend yield of its perpetual preferred stock, STRC, will remain unchanged at 11.50% in June 2026. There has been no reduction, suspension, or default on STRC dividends; everything is proceeding normally.

Secondly, Strategy still possesses a substantial Bitcoin reserve. With 843,706 BTC in reserves, Strategy firmly holds the top spot among Bitcoin treasury companies, representing 4.01% of the total 21 million BTC. Assuming no prolonged Bitcoin crash and that the company's financing channels remain open, Strategy's cash flow pressure remains manageable.

IV. What do industry insiders think?

• Forbes points out that STRC, which went public in July 2025, was the largest IPO in the US that year, raising $2.521 billion, with monthly dividend payouts of approximately $80 million to $90 million. By publicly and intentionally selling a small amount of Bitcoin to fulfill these obligations, Strategy demonstrated to rating agencies that it considered preferred shareholders as senior creditors. This credibility made STRC more attractive. Increased demand for STRC meant more funds were raised, leading to more Bitcoin being purchased.

• Benchmark analyst Mark Palmer noted, "Investors should now view Strategy's Bitcoin holdings as a reliable backup for preferred stock dividend financing."

• Peter Schiff, a well-known gold advocate and cryptocurrency skeptic, wrote on X: "Most STRC investors will likely lose most of their money because the price of STRC will eventually crash once Michael Saylor is forced to cancel the dividend payment. At that time, a large number of lawsuits will likely further exacerbate the problems facing Strategy (MSTR). Those investors who suffered losses due to misleading advertising are expected to seek compensation through legal channels to recover their investment losses."

• The Motley Fool argues that the first concern regarding Strategy's inflation problem is that inflation has a double impact: it erodes the real value of your $100 stock and reduces the value of your dividends. Therefore, the longer you hold the stock, the more severe the inflation problem becomes. Secondly, Strategy can easily cut or delay dividend payments without incurring traditional debt defaults. Thus, if the price falls below par value, new share issuance will cease, leaving you holding an asset with lower returns than initially advertised, and your principal may be lost in the short term or even forever.

Summarize

STRC recently fell from around $100 to $94.65, primarily due to factors including a decline in Bitcoin prices, competition, and technical selling. Currently, STRC does not face default risk; the company continues to pay dividends at 11.5% and uses it as a core financing tool.