Strategy Launches STRD, Its Third ‘Bitcoin-Backed’ Preferred Stock on Nasdaq

MicroStrategy (MSTR) has expanded its suite of bitcoin-backed preferred stock offerings with the launch of STRD on the Nasdaq. This marks the company’s third such security, following STRF and STRK. Trading commenced on Wednesday, with STRD closing the day with a modest 0.24% gain.

The newly issued security, officially named the 10% Series A Perpetual Stride Preferred Stock (STRD), stands out for its attractive dividend structure. It offers a fixed annual dividend yield of 10%, surpassing the returns offered by MSTR’s other preferred stock offerings. This makes it particularly appealing to investors prioritizing high income potential.

However, this high yield comes with a degree of risk. Unlike STRF and STRK, STRD is non-convertible and non-cumulative. This means that dividends are only paid when declared by the company’s board of directors. Furthermore, any missed dividend payments do not accumulate, unlike cumulative preferred stocks. This structure introduces uncertainty regarding the regularity of dividend payouts.

Despite this added risk, the non-convertible and non-cumulative nature of STRD is strategically positioned to attract a specific segment of long-term investors. Those seeking high, fixed-income returns without the complexities of convertible securities or the potential burden of accrued unpaid dividends are the target audience. The absence of management fees further enhances its appeal to these investors.

MicroStrategy aims to raise a substantial amount of capital through this offering, targeting approximately $1 billion. To achieve this, the company is selling 11.76 million shares at a price of $85 per share. After deducting fees and expenses, the net proceeds are projected to reach roughly $979.7 million. These funds will be allocated to general corporate purposes and further bitcoin accumulation, reflecting the company’s ongoing commitment to the cryptocurrency.

Initial investor interest appears robust, including participation from within the company itself. Jarrod Patten, a member of MicroStrategy’s board of directors, recently disclosed a purchase of 5,000 STRD shares, adding to his existing holdings of MSTR common stock and STRF preferred stock. This insider buying signals confidence in the new offering and its potential for future growth. The launch of STRD highlights MicroStrategy’s evolving capital-raising strategy, shifting its focus towards preferred stock offerings as it seeks to optimize its financial structure and capitalize on investor demand for high-yield, bitcoin-related investments.