Strategy CEO Explains Factors Behind STRC Preferred Stock's Sharp Decline
In an interview, Strategy (MSTR) CEO Phong Le attributed the nearly 25% drop in its preferred stock STRC to unexpected leverage from investors borrowing against Bitcoin. The $9.3 billion preferred shares, designed to trade near their $100 face value and offering a 12% annual dividend, fell as low as $75 this summer due to forced selling when Bitcoin prices declined. Le explained that traders borrowed at around 6% interest using BTC collateral to capture STRC's higher yield. When the crypto market dipped, margin calls led investors to sell STRC or add more Bitcoin, exacerbating downward pressure on its price. In response, Strategy initiated buybacks of STRC in July and maintained a $5.1 billion cash reserve to cover future dividends. The CEO emphasized that increasing dividends further would have drained liquidity and hurt common shareholders (MSTR). Instead, the company opted for share repurchases, which reduce dividend obligations over time. Le also noted improved institutional ownership of STRC and expects its price will stabilize as long-term investors replace leveraged traders.
Tickers: $MSTR
Topics: buybacks corporate finance dividend policy leverage risk preferred stock