Discharge of responsibility: The analyst who wrote this piece has Strategy (MST) actions.
Strike (STRK), the preferred actions issued by the Bitcoin (MSTR) buyer’s strategy have been included for just over a month and is currently 3% higher than in its introduction on February 5. The common action of the strategy, on the other hand, is 20% lower in the same period.
Preferred actions as Strk can be considered as a capital and debt hybrid. The holders have a greater right to dividend payments than the owners of common shares if the company makes them and also to the company’s assets in case of liquidation. Strk is a perpetual problem, which lacks an expiration date (such as capital) and pays a fixed dividend (such as debt).
These characteristics mean that the preferred stock tends to be less volatile than the common stock. That certainly seems to be the case of Strk. According to the Strategy Board, Strk has a 26% correlation with MSTR and a slightly negative -7% correlation with Bitcoin (BTC). It is also less volatile, at 49%, compared to the approximately 60%of Bitcoin and the volatility of MSTR greater than 100%.
Last week, Strategy announced an offer of $ 21 billion in the market (ATM) for Strk. That is, it is prepared to sell until that amount of shares at the current market price for a period of time. If the entire Strk is sold, the company would face an annual total dividend bill of around $ 1.68 billion.
Generating that amount of cash means that the company would sell ordinary shares through an automatic, unlikely ATM offer, given the depressed price of shares in recent times, or the use of cash generated by the operations or income of any convertible debt raised.
Strk offers an annual dividend yield of 8% based on its $ 100 liquidation preference and at the currently $ 87.45 price, it offers effective yield of around 9%. As with debt, the higher the STRK price, the lower the yield and vice versa.
Strk also includes a feature that allows each action to be converted into 0.1 common shares, equivalent to a ratio of 10 to 1, when the MSTR price reaches or exceeds $ 1,000. The strategy actions closed to $ 262.55 on Wednesday, for the option of becoming viable, it would have to significantly appreciate, offering upward potential beyond the fixed dividend of Strk.
As a product generating product with less volatility, Strk presents a more stable option with upward potential. However, the massive offer of ATMs could affect this upward potential, similar to the way in which sales of ATM actions have affected the performance of common actions.
