Strategy's Preferred Stock Slips Below Par, and Its Founder Calls a Bitcoin Sale a Feature

Strategy, the company formerly known as MicroStrategy and the largest corporate holder of Bitcoin, is facing pressure on the financing structure that funds its purchases. Its Variable Rate Series A Perpetual Stretch Preferred Stock, known as STRC, is designed to trade near a $100 stated value through an adjustable dividend. According to CoinDesk, a combination of a bond buyback, shrinking cash reserves and a weaker Bitcoin price pushed STRC below par and turned a technical question into a market-wide debate about dividend coverage.

Strategy has responded by managing the instrument's terms. The company set the annual dividend rate at 11.50% for periods beginning June 1 and amended the certificate to pay the dividend twice a month rather than once, a change to frequency that does not alter the total obligation.

The structure exposes the central risk. STRC promises a steady payout, but the assets behind it are volatile, and when Bitcoin falls the market questions whether the dividend can be sustained without selling coins or issuing more equity.

Adam Back, the cryptographer and Blockstream chief executive whose proof-of-work concept predates Bitcoin, offered an optimistic interpretation. He argued that Strategy's sale of 32 BTC to meet dividend obligations is a feature rather than a flaw, evidence that Bitcoin can fund real liabilities. Skeptics note the same sale shows the model depends on liquidating the asset it is meant to accumulate.