Why Michael Saylor Calls Strategy’s STRC Preferred Stock His Firm’s ‘iPhone Moment’
Strategy (MSTR) launched its Perpetual Stretch Preferred Stock (STRC), raising $2.5 billion in an initial public offering and establishing a $4.2 billion at-the-market (ATM) program. STRC, or “Stretch,” is a variable-rate, perpetual preferred stock designed for income-focused investors seeking indirect bitcoin exposure. It offers a monthly dividend, initially set at 9% annualized, based on a $100 par value. This dividend is adjustable, aiming to maintain a $100 trading price.
Crucially, STRC is overcollateralized with bitcoin at a 5:1 ratio. This means for every dollar of STRC issued, Strategy holds $5 worth of BTC. In the capital structure, STRC ranks senior to other preferred stocks (STRD, STRK) and common equity but junior to debt and the STRF preferred series. Dividends are cumulative, and a “stopper” mechanism prevents payouts to junior securities if a payment is missed. The stock is redeemable at the issuer’s option and includes a put right at liquidation value plus accrued dividends.
The IPO issued 28 million shares at $90 each. Proceeds fund general corporate purposes, including further bitcoin purchases. The ATM program allows Strategy to issue up to $4.2 billion in STRC shares, offering flexibility based on market conditions and aiming to maintain a stable $100 trading price.
Michael Saylor, Strategy’s Executive Chairman, views STRC as a transformative innovation, comparing its potential impact to that of the iPhone. He highlights STRC’s accessibility and simplicity, contrasting it with previous, more complex offerings. The product aims to address long-term volatility and offer a consistent premium over bank yields. Its design prioritizes trading near par, providing investors with stability, unlike previous products that experienced significant principal value fluctuations. Saylor believes STRC’s combination of simplicity, stability, and yield allows Strategy to significantly scale its bitcoin holdings without selling existing BTC, using its treasury as collateral to access liquidity at a retail scale.
