Author: André Beganski
Compiled by: Blockchain Vernacular
Decrypt notes that Strategy's flagship preferred stock faced significant selling pressure on Thursday, with the price hitting an all-time low after the company, which continues to buy Bitcoin, reiterated it will keep making payments to Stretch (STRC) shareholders.
At press time, STRC was down 2.6% to $87.45, rebounding from an intraday low of $82.53.
Although the preferred stock has not returned to its $100 par value since mid-May, the product's performance is cyclical in nature: the price typically pulls back after STRC's ex-dividend date.
The ex-dividend date is the day from which investors who buy Strategy's flagship preferred stock will no longer be entitled to the upcoming distribution. By the end of this month, as STRC's next dividend payment date arrives, the company expects to distribute approximately $100 million to investors.
James Butterfill, Head of Research at CoinShares, told Decrypt: "STRC's continued weakness appears to be driven less by Bitcoin itself and more by market uncertainty over how Strategy will fund and manage its growing fixed obligations. A Bitcoin rally boosts the asset value underpinning Strategy, but it doesn't automatically increase its disposable cash."
Last year, a cash reserve was established to manage debt and dividends. At the start of the year, the company initially prepared $2.25 billion; however, after repurchasing some debt at a discount, the cash reserve has now been adjusted to $1.1 billion.
STRC is designed to trade around its $100 par value. Strategy has previously stated that when this preferred stock trades below that level for an extended period, the company can stimulate demand by increasing the dividend rate. For the past four consecutive months, that rate has remained at approximately 11.5%.
Mark Palmer, Managing Director and Senior Research Analyst at Benchmark-StoneX, told Decrypt that precisely because of this, the intensifying weakness in STRC is a mechanistic outcome, not a signal that the company is in trouble. He noted that when the product's coupon rate is effectively below market levels, its price will naturally drift lower.
Palmer stated: "This structure is working as designed. At current price levels, we believe STRC offers investors a compelling total return opportunity: on one hand, the current yield, and on the other, a built-in mechanism that will drive the price back toward par value."
He added that Benchmark-StoneX analysts expect Strategy to raise STRC's dividend rate in early July, "and we anticipate this move will support its price moving back toward par."
As STRC declined, Strategy's common stock also came under pressure. The company's share price fell to a low of $109.36 on Thursday, a four-month low. Over the past month, its stock has cumulatively dropped 32%, outpacing the decline in Bitcoin's price over the same period.
This trend deepened last month. Strategy, headquartered in Tysons Corner, Virginia, decided to sell 32 Bitcoins, cashing out $2.5 million. The company had previously signaled this move, aiming to send a message: it can fulfill its commitment to paying distributions to preferred shareholders, no matter what.
Butterfill said: "Previously, the market's core narrative was Strategy's continuous accumulation of Bitcoin through capital issuance. Selling just a portion to meet distribution obligations resets that capital flow and makes the overall strategy more complex, though this impact is only temporary."
The sale also raised questions in the market: will the publicly traded company holding the most Bitcoin globally further reduce its holdings in the future? On Wednesday, Strategy responded in a post on X, stating that its holdings thesis will determine whether market confidence in STRC is maintained in the coming years.
The company stated: "With our BTC reserves, we have 32 years of liability coverage capacity." This claim is based on its roughly $55 billion in Bitcoin reserves compared to approximately $1.7 billion in annual liabilities and interest expenses.
Taproot Wizards CEO Udi Wertheimer pointed out on X that if Strategy actually tries to use its Bitcoin reserves for financing or liquidation, the value it could ultimately realize would likely be far below the nominal figure as the market gradually digests that portion of the holdings.
According to CoinGecko data, Bitcoin fell below $62,500 on Thursday, an intraday drop of over 5%. At this price, the total value of Strategy's 846,842 BTC holdings is approximately $53 billion. Even so, analysts still view the current pressure as growing pains rather than a fatal flaw.
Butterfill stated: "At this stage, I don't think this is an existential issue. It indicates that Strategy's financing model is becoming less efficient, and investors are demanding higher returns to be willing to take on this risk."
