Michael Saylor Builds Out Own Yield Curve With Upsized Preferred Stock Sale
MicroStrategy (MSTR), under the leadership of Michael Saylor, significantly expanded its capital structure with a substantially upsized preferred stock offering. This issuance, designated STRC, adds a short-duration layer to the company’s financing strategy, complementing existing preferred shares (STRD, STRF, and STRK) and diversifying its bitcoin acquisition funding methods.
The STRC offering, initially planned for $500 million, concluded at $2.5 billion, involving 28 million shares priced at $90 each. This substantial increase highlights MicroStrategy’s ongoing commitment to accumulating bitcoin (BTC). STRC is a senior, perpetual preferred stock with a variable monthly dividend, appealing to yield-seeking investors prioritizing stability. At launch, it boasted an effective yield of 9.5%–10.0%, paid monthly.
A key feature of STRC is its mechanism designed to maintain a trading range near $100. This involves adjusting dividend rates, utilizing secondary issuance windows, and employing call options above par. Should the price fall below $99, dividends will rise, and share sales will halt. Conversely, if the price surpasses $101, new shares will be issued, and existing shares may be called. This self-correcting system aims to stabilize the stock’s price while providing attractive returns in the current high-interest-rate environment. Dividend reductions are capped at a maximum of 25 basis points plus the maximum decrease in the one-month secured overnight financing rate (SOFR) over a given period.
STRC offers a compelling alternative to traditional short-duration credit options. Its yield significantly exceeds the approximately 4% available from money market funds and Treasury bills, making it attractive to investors seeking higher returns with moderate price volatility. It positions itself competitively against instruments such as commercial paper and bank deposits. The high seniority of STRC further enhances its appeal to risk-averse investors. The successful completion of this significantly larger-than-expected offering underscores investor confidence in MicroStrategy’s strategy and its ongoing commitment to bitcoin.
