Strategies’ (MSTR) senior perpetual preferred stock, STRF, has garnered increasing attention as the company’s most successful credit product since its launch in March.
Trading at $110, STRF is up 36% since issuance and has rebounded 20% from its Nov. 21 low of $92. On this day, the local bottom price of Bitcoin was around $80,000, highlighting the strong correlation between STRF and Bitcoin.
STRF occupies the top level of Strategy’s priority structure. It pays a fixed cash dividend of 10% per annum and features governance rights plus penalty-based step-ups in the event of missed payments. Although premium pricing has reduced the effective yield to approximately 9.03%, demand remains strong due to the security’s senior protection and long-term credit profile.
In late October, Executive Chairman Michael Saylor highlighted the widening credit spread between STRF and junior STRD. This spread measures the additional yield investors require for holding risky junior securities and is currently 12.5%. As investors flocked to senior exposure, the gap widened to an all-time high of $1.5 at the November 21 low, with STRD trading as low as $65. The spread has since normalized to around 1.3.
We are now seeing differences across Strategy’s priority suites. STRC has raised its dividend rate four times to maintain investor interest.
Strategy’s equity has also recovered, rising to about $185 from a Dec. 1 low of $155. This reflects improved sentiment across both the company’s balance sheet and the Bitcoin market since the announcement of a $1.44 billion cash buffer reserve against preferred dividend payments.
