Strategy Inc. (MSTR) experienced a 5% drop in its common stock price, closing at $126.14, following a significant announcement from CEO Phong Le regarding the company”s new funding strategy for acquiring Bitcoin. The decision to shift from common stock sales to the issuance of preferred stock is aimed at minimizing dilution for existing shareholders.
During an appearance on Bloomberg”s “The Close,” Le revealed that the company would focus on its perpetual preferred stock, known as “Stretch” (STRC). This move marks a pivotal change in Strategy”s approach to financing its Bitcoin purchases. On the same day, STRC reclaimed its $100 par value for the first time since mid-January, thus allowing the company to resume at-the-market offerings.
The STRC shares, which offer an annual dividend of 11.25% paid monthly, had fallen below $94 earlier in the month as Bitcoin”s price plummeted below $60,000. However, the recovery to the $100 threshold is crucial as it enables further capital raising without negatively impacting common shareholders.
Le emphasized the importance of this funding strategy, stating, “The story of the day is Stretch closes at $100, exactly how it was engineered to perform.” This strategic decision not only signifies a shift in the company”s capital structure but also aims to attract investors seeking stability amidst Bitcoin”s price volatility.
Despite the positive news regarding STRC, Strategy”s common shares faced pressure as Bitcoin traded around $67,500, reflecting a relatively flat market after reaching an intraday high above $68,000. Le dismissed speculation about acquiring underperforming Bitcoin treasury companies, labeling such strategies as distractions from the company”s core business objectives.
As the largest corporate holder of Bitcoin, Strategy continues to buy Bitcoin regularly, maintaining its position in a competitive market where other treasury firms are struggling. With the crypto landscape becoming increasingly crowded, Strategy”s focus on its preferred stock offerings may provide a unique advantage moving forward.
In conclusion, while the decline in common shares may raise concerns among investors, the strategic pivot towards preferred stock could enhance the company”s ability to secure funding for its Bitcoin acquisitions without diluting shareholder value.
