The strategy’s perpetual preferred security, Stretch (STRC), fell as low as $97.11 on Thursday as bitcoin fell to the $73,000 mark.
STRC tends to face selling pressure during bitcoin declines and in the days immediately following its ex-dividend date, as seen on November 20 and February 5. The ex-dividend effect typically results in a price adjustment that reflects the value of the dividend, while periods of bitcoin weakness can reduce investor appetite for securities related to the strategy. Together, these factors have historically created short-term pressure on the market price of STRC.
The company has structured STRC to trade near its par value of $100, as maintaining that level allows Strategy to continue issuing shares through its at-the-market (ATM) program and efficiently raise additional capital.
Strategy recently repurchased $1.5 billion of its 0% convertible senior notes due 2029, reducing its overall debt load. However, the buyback was funded with cash from the company’s US dollar reserve. As a result, Strategy’s cash balance decreased from approximately $2.25 billion to $871 million.
Based on the company’s current annual preferred dividend obligations of approximately $1.7 billion, the remaining cash reserve now provides only about six months of coverage, but was initially deployed to cover dividend obligations for 24 months.
CEO Michael Saylor discussed several potential sources of capital that could be used to meet dividend obligations and support the balance sheet in a recent interview with CoinDesk senior analyst James Van Straten. These include selling bitcoins, issuing additional MSTR shares when shares trade above a multiple of 1.22 times net asset value (NAV), or raising capital by issuing STRCs. Saylor emphasized that management evaluates these decisions through the lens of bitcoin per share, prioritizing actions that bring benefits to shareholders.
Competing bitcoin treasury company Strive Asset Management (ASST) has taken a different approach. The company recently announced daily dividend payments for its perpetual preferred security, SATA. Over the past two weeks, SATA has remained firmly anchored around its $100 face value while delivering a dividend yield of approximately 13%, even during the bitcoin crash.
Although the daily dividend mechanism has not yet been implemented, investors can see it as a stabilizing feature that helps keep the stock trading close to par.
Strive has also eliminated all legacy debt through the acquisition of Semler Scientific, a balance sheet strategy that reflects the direction Strategy appears to be following through its recent debt buybacks.
The gap in market performance between the two companies has been notable. Over the past three months, Strive stock has gained about 110%, compared to a 12% rise in MSTR and an 8% rise in bitcoin. This divergence suggests that investors may be rewarding Strive’s cleaner balance sheet and its preferred higher-yield structure.
