On Tuesday, Strategy, formerly MicroStrategy, launched a new preferred stock offering called Stretch, ticker STRC. Initially intended as a $500 million deal, it was quickly upsized to around $2.5 billion, with shares priced at $90 and an annual dividend starting at 9%, yielding about 10% at issue. The defining feature: variable monthly dividends, designed to keep STRC trading near its $100 par value.
STRC joins earlier offerings—Strike (STRK), Stride (STRD) and Strife (STRF)—all of which are perpetual, non‑voting securities paying high discretionary dividends. Strategy’s investor presentation visually stacks these preferred securities like a pyramid atop $120 billion in common equity, all backed by $71 billion in unencumbered Bitcoin.
Why STRC Is Different
Unlike most preferred stock, which pay fixed coupons at quarterly intervals, Stretch adjusts dividends monthly to maintain stable pricing. This is a deliberate break from capital‑raising norms and is intended not just to raise funds, but to signal price stability, echoing money‑market funds more than typical equity instruments.
This strategy lies at the heart of Strategy’s model: issue securities on favourable terms, use proceeds to buy more Bitcoin and fund prior payouts, then lean on investor confidence to repeat the cycle.
Paradox of Leverage
On paper, Strategy’s balance sheet looks solid: $8 billion in convertible debt against $71 billion in Bitcoin reserves seems conservative. In reality, it’s precarious. About $5 billion of that debt is out‑of‑the‑money, meaning it won’t convert unless the stock price rises—something Strategy’s legacy software business can’t support with cash flow. Redemption, if required, would force major liquidity strains, but selling Bitcoin would contradict the company’s buy‑and‑HODL ethos.
Since pivoting to Bitcoin in August 2020, Strategy’s stock has multiplied more than 25 times, yet it has fallen about 10% since November 2024, even as Bitcoin prices rose ~20% and the company added over 215,000 new coins. Its “BTC Yield” metric—Bitcoin per share—has improved, but the share price has not.
The Endgame
Michael Saylor emphasises a goal to reduce convertible debt and simplify the capital structure by turning that debt into permanent capital—common and preferred stock. That would eliminate redemption risk, letting the company fall silent in downturns if necessary, rather than face forced bond buybacks.
STRC’s name—Stretch—aptly captures both its structural flexibility and the financial stretching Strategy is executing to maintain stability. For now the approach works, but if market sentiment shifts or convertible bonds remain unredeemed, the whole complex could unravel.
Ambitious, Clever, With Fragile Foundations
Strategy’s new Stretch offering is a bold and creative financial engineering play. By aligning dividend mechanics with market pricing, it cleverly positions STRC as a Bitcoin‑backed, low‑volatility vehicle attractive to yield‑oriented investors. It shows dutiful adaptation and an eye toward institutional acceptance.
However, beneath the showmanship is a fragile structure heavily reliant on investor belief. The pyramid of capital relies on perpetual buyings; if investor confidence falters and stock price weakens, the out‑of‑the‑money convertibles become a serious liability. The company’s legacy operations can’t provide the cash needed to service them. That makes the plan inherently vulnerable to liquidity crunches.
Strategy may one day fulfil Saylor’s vision of a streamlined capital stack sustained by permanent capital and held together by Bitcoin reserves. But until that future arrives, the firm remains dependent on ever‑fresh capital inflows and market goodwill—both of which could dry up fast if sentiment turns.
