Strategy Inc. is intensifying its focus on Bitcoin to reassure investors while actively acquiring the cryptocurrency that defines its core operations. The company is reportedly expanding its line of perpetual preferred shares, priced close to $100 and offering a reset dividend monthly.
Preferred Shares as Stability Anchors
At the heart of this strategy is Stretch, symbolized as STRC, which boasts an annualized dividend reset currently standing at 11.25% and maintaining a price around the $100 mark as per Strategy’s listings.
CEO Phong Le revealed to Bloomberg that the company plans to rely more on preferred capital rather than common equity to fund future Bitcoin purchases.
A Firm Stand on Continuous Buying
Michael Saylor, the executive chair of the company, has been vocal about holding and acquiring Bitcoin. Saylor affirmed that Strategy will continue to accumulate Bitcoin regardless of price fluctuations, with plans to make quarterly purchases consistently. This commitment aims to reassure stakeholders amid Bitcoin’s volatile market movements.
Acquiring Bitcoin Without Impacting Stock Value
The strategy is straightforward – issue preferred stocks attractive to income-seeking investors and utilize the proceeds to acquire more Bitcoin, avoiding the need to sell common shares or liquidate holdings.
Stretch presents an opportunity for investors to gain exposure to Bitcoin while mitigating the volatility experienced by holders of Strategy’s common shares. However, some financial analysts caution that this approach transfers risk to preferred stockholders, sparking debate on the reliance on yield products for stability.
Bitcoin Holdings and Implications
Reports indicate that Strategy maintains a substantial Bitcoin portfolio, numbering in the hundreds of thousands of coins, with executives emphasizing a long-term perspective on returns.
The company’s balance sheet now resembles that of a crypto fund rather than a typical software enterprise, prompting discussions on how investors should assess the stock relative to the underlying asset.
Key Insights for Investors and Market Trends
Investors seeking cash yield without direct exposure to cryptocurrencies may find preferred stocks appealing. Nonetheless, preferred shares come with their own set of risks, such as dividend resets, which compete with the company’s obligations to preferred shareholders alongside managing leverage and reserves.
Featured image courtesy of Unsplash, chart sourced from TradingView
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