Michael Saylor, executive chairman of Strategy, Inc. (MSTR), the world’s largest public Bitcoin holder, introduced the company’s fourth perpetual preferred stock offering, Stretch (STRC), in late July. Thaler described STRC as Strategy’s iPhone moment and a milestone that redefined corporate finance.
STRC, which the company has dubbed Stretch “short-term high-yield credit,” is a perpetual preferred stock designed to behave like a high-yield, low-volatility cash product. Based on a $100 face value, an annual 11% dividend is distributed monthly in cash.
Unlike traditional preferred stocks, dividends can be adjusted monthly based on preset rules. The objective is simple: to keep STRC trading near $100 and reduce the price volatility typically associated with high-yield securities.
The appeal for investors is simple. With short-term U.S. Treasuries yielding close to 3.5%, STRC offers approximately 3x yield without long-term risk or large price fluctuations.
In Strategy’s capital structure, STRC ranks higher relative to common stock and other preferred stocks such as STRD and STRK, but remains lower relative to corporate bonds and STRF preferred stock. This position gives STRC stronger rights to its cash flows, while also allowing Strategy to raise capital without increasing leverage.
The strategy uses market share sales to fund the purchase of Bitcoin when the security is trading at a face value of $100. As of last week, the company had raised $119.1 million in net proceeds from the sale of STRC ATMs and $1.12 billion from the issuance of common stock, collectively funding the purchase of 13,627 Bitcoin.
Meanwhile, STRC’s dividend has been raised multiple times to gauge investor appetite, and currently stands at 11%.
STRC’s trading volume on Monday was $175.7 million, nearly triple its 30-day average trading volume of $63.6 million, and all trades on Monday were above $100.
In November, Strategy tapped about $130 million in STRC ATM issuance, and the stock traded net for the first time in about a week.
The company’s goal is to continually maintain STRC trading at or near parity in order to accumulate more Bitcoins.
