Chief Strategy Officer Michael Saylor said in a recent podcast that investors are overlooking his preferred perpetual stock, STRD, because it trades as a junior security, unlike STRF, which is a senior instrument.
STRD’s junior status has caused it to receive less attention despite its higher potential returns, Saylor said.
In an equity stack, senior securities are paid first and typically carry lower risk and lower returns. Junior securities pay after senior securities and carry greater risk, offering higher potential returns in return.
As a senior security, STRF is protected by penalty provisions and has payment priority, making it attractive to risk-averse investors who seek yield but prioritize payment security. It is currently trading above par at $109 and offers an effective yield of 9.1%, generating a lifetime return of 29%.
STRD is the junior version, offering a higher dividend and yield to compensate for its lower payout priority and higher risk. STRD is non-cumulative and is secondary to the equity pool, with penalty provisions for the company if the dividend is not paid. It is trading below par at $78, with a lifetime yield of -7% but a higher effective yield of 12.7%, similar to a junk bond.
The two instruments are structurally similar, with the key difference being the risk-return profile: STRF provides a safer return, while STRD offers a higher return for taking on more risk.
Saylor questioned why investors preferred STRF over STRD when they could outperform by more than 350 basis points. He highlighted the emergence of a credit spread between the two instruments, driven by their senior and junior ratings.
Although MSTR is not required to pay dividends on the junior shares, Saylor dismissed concerns about a possible non-payment. MSTR will maintain those payments, he said, because failing to do so would significantly hurt STRD’s price. Furthermore, the company’s goal is to sell these securities to raise capital for additional bitcoin purchases, making STRD default not a viable option.
Additionally, Saylor announced Sunday via The strategy currently has 640,250 BTC.
