Strategy (formerly MicroStrategy) is planning to expand its perpetual preferred stock issuance to alleviate market pressure caused by excessive volatility in common shares. CEO Phong Le recently stated that preferred stock may become a core financing tool in the future, helping the company continue its Bitcoin accumulation while reducing reliance on dilution of common equity.
Since the beginning of this year, MSTR’s stock price has declined approximately 17%, while Bitcoin has fallen over 22% during the same period. In an interview with Bloomberg, Le pointed out that the sharp stock price fluctuations are highly correlated with the company’s “digital asset reserve plan” and Bitcoin prices. When Bitcoin rises, the stock price tends to increase rapidly; conversely, it faces downward pressure when Bitcoin declines. To meet investor demand for exposure to digital assets without bearing extreme volatility, Strategy has launched a perpetual preferred stock called “Stretch.”
This preferred stock is based on a $100 par value, offers floating dividends currently annualized at about 11.25%, and adjusts monthly to help keep the price near par. Le revealed that the recent closing price of Stretch was exactly $100, indicating that its pricing mechanism is functioning as intended.
However, preferred stock still constitutes a small part of the company’s overall financing. Previously, multiple Bitcoin acquisitions were mainly funded through common stock issuance. Strategy currently holds approximately 714,644 Bitcoin, with an average purchase cost of about $76,056 per Bitcoin, while the market price hovers around $67,000, resulting in an unrealized loss of approximately $6.1 billion. As a result, the company’s stock trading price has fallen below its net asset value.
Data shows that Strategy’s diluted net asset value (mNAV) is about 0.95 times, meaning the stock price is below the value of Bitcoin per share. This discount makes further financing through common stock more risky due to potential dilution. By shifting to perpetual preferred stock, the company aims to maintain its Bitcoin acquisition pace while stabilizing its capital structure.
For MSTR shareholders, this shift helps reduce dilution but also entails higher fixed dividend obligations. If Bitcoin remains weak, cash flow pressures will increase. Strategy is restructuring its capital structure to balance growth and risk, but the effectiveness of this approach remains to be seen by the market.
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