Strategy Inc. (MSTR), the Bitcoin treasury company that recently rebranded from enterprise software firm MicroStrategy, is introducing a variable-rate preferred stock with an initial dividend of 9% per year.
The “Stretch” stock STRC’s public offering price is $90 per share, and the firm estimates that the net proceeds from the offering will be approximately $2.5 billion, according to a press release published Friday.
The stated intent is that the rate on the preferred stock will be adjusted to keep the market price of the shares at around $100.
“If the shares are trading below that, they would raise the yield to increase demand, and the inverse would be true if they are trading above the target,” Michael Miller, an equity analyst at Morningstar, explained to etf.com. “That said, there are restrictions on how fast and far the yield can be reduced, which does provide some stability to investors.”
Top ETFs Holding MSTR
|
Ticker |
Fund Name |
Segment |
% Allocation |
Market Value |
# of Shares |
30 Day |
|
T-Rex 2X Long MSTR Daily Target ETF |
MicroStrategy Inc – Benchmark Price Return |
82.68% |
$2.98B |
7.33M |
6.04 |
|
|
Grayscale Bitcoin Adopters ETF |
Indxx Bitcoin Adopters Index – Benchmark TR Net |
20.62% |
$922.37K |
2.22K |
7.3 |
|
|
First Trust SkyBridge Crypto Industry & Digital Economy ETF |
No Underlying Index |
19.27% |
$30.45M |
75.03K |
8.75 |
|
|
Bitwise Bitcoin Standard Corporations ETF |
Bitwise Bitcoin Standard Corporations Index – Benchmark TR Net |
18.73% |
$6.64M |
16.37K |
11.63 |
|
|
Roundhill MSTR WeeklyPay ETF |
No Underlying Index |
12.85% |
$64.73K |
156.00 |
0 |
Source: etf.com & FactSet
Still, Miller said he would caution investors that there is meaningful risk to an investment like this, and he would “categorically reject any direct comparison to a money market fund.” (Bitcoin-focused financial services firm NYDIG described the stock as a “money-market-style vehicle.”)
Milled explained that while Strategy has significant Bitcoin assets, which at current prices can fully cover all of its outstanding debt and preferred offerings many times over, STRC won’t have a direct claim on any specified portion of those assets. There’s also the fact that Bitcoin’s price is extremely volatile.
“This means that the issuer, MSTR, can continue to issue new debt and preferred shares on top of this offering. Additionally, MSTR doesn’t actually have the earnings to cover the dividend payments on STRC,” Miller said. “The assumption is that appreciation on the Bitcoin purchased will be sufficient to provide the cash needed, but this creates long-term risk for investors that the dividends could be cut or suspended if Bitcoin prices fall.”
