Strategy is done diluting shareholders to buy Bitcoin. CEO Phong Le laid out the pivot Wednesday.
“We will start to transition from equity capital to preferred capital,” Le told Bloomberg’s “The Close.”
The shift marks a tactical change for the Bitcoin treasury firm. Common stock issuance dilutes existing shareholders with every new Bitcoin purchase. Preferred stock offers fixed dividends instead—attracting a different buyer.
Stretch is Strategy’s weapon of choice. The perpetual preferred stock, ticker STRC, launched in July and pays over 11% annually. It’s the company’s fourth perpetual preferred offering. All designed to fund Bitcoin acquisitions without hammering the stock price.
Wednesday brought validation. STRC reclaimed its $100 par value at the close—first time since mid-January. Le called it the “story of the day.”
That $100 mark matters. Strategy set par as its minimum selling price. Below par, the company can’t issue new shares. Above it, the capital spigot opens.
STRC dipped below $94 earlier this month when Bitcoin crashed under $60,000. Bitcoin now trades around $66,800—down from an intraday peak over $68,000 but stable over 24 hours. That recovery pulled STRC back to par.
Le admitted the preferred stock strategy needs work. It will “take some seasoning” and marketing to convince traders. Different product. Different pitch.
“Throughout the course of this year, we expect Stretch to be a big product for us,” he said.
The crypto treasury space is getting crowded. Multiple companies now compete for the same slice of Bitcoin-focused investors. Analysts warned the competition is creating distortions—some firms trade below the value of their Bitcoin holdings.
That discount sparked speculation. Could bigger treasury companies acquire smaller rivals and scoop up Bitcoin on the cheap?
Le shut it down. Strategy won’t play that game.
“I think in any new market, whether it be electric cars or AI or SaaS software, you want to focus on your core product,” he explained. “I think it would be a distraction to go buy, at a discount to net asset value, another digital asset treasury company.”
The strategy: build the preferred stock pipeline. Avoid common stock dilution. Ignore acquisition opportunities.
Focus matters in emerging markets. Electric vehicle makers that chased side projects stumbled. SaaS companies that diversified too early lost market share. Le’s betting the same discipline applies to Bitcoin treasuries.
Strategy’s common stock didn’t reward the strategic clarity Wednesday. MSTR shares closed down over 5% at $126.14. The market wanted more than a preferred stock pitch.
The broader question: can preferred stock scale? Stretch pays 11% annually, but institutional buyers typically demand liquidity and track records. STRC has neither yet.
Perpetual preferred stock occupies a strange middle ground. Not quite equity. Not quite debt. Dividends are fixed, but there’s no maturity date. The instrument appeals to income-focused investors—a group that historically avoids Bitcoin exposure.
Strategy is trying to bridge that gap. Bitcoin treasury with bond-like payments. High yield in a volatile asset class.
The model worked for utilities and REITs that issued preferred shares for decades. Can it work for a Bitcoin accumulation vehicle? Le’s betting yes, but the market hasn’t fully bought in.
STRC trading at par removes one barrier. Strategy can now issue new shares without selling below designated value. But whether buyers show up in size remains unproven.
Competitors are watching. If Strategy successfully taps preferred stock markets at scale, others will copy the playbook. If it flops, the Bitcoin treasury model reverts to common stock dilution or convertible debt.
Bitcoin’s price stability helps. At $66,800, volatility has compressed compared to the wild swings earlier this year. Lower volatility makes fixed-dividend instruments more attractive—investors can model returns without assuming massive Bitcoin crashes.
But Bitcoin traded over $68,000 intraday before pulling back. That whipsaw action continues. Any crash toward $60,000 again would sink STRC below par and shut down Strategy’s issuance plans.
The company is trapped by its own rules. Setting par at $100 creates discipline but also vulnerability. One bad Bitcoin week and the capital pipeline closes.
Le’s marketing challenge is steep. Convincing traditional preferred stock buyers to fund Bitcoin purchases requires education and trust. Most income investors fled crypto after the 2022 blowups. Terra. FTX. Celsius. Three Arrows Capital.
Strategy offers a different structure—no lending, no leverage, just Bitcoin in cold storage. But the psychological barrier persists.
The company disclosed its refusal to acquire rival treasury firms explicitly. That stance separates Strategy from potential consolidation plays. Some analysts projected a wave of mergers as weaker Bitcoin treasury companies trade below net asset value.
Le’s rejection suggests confidence. Strategy believes organic growth through preferred stock beats opportunistic M&A. Time will test that thesis.
STRC needs volume. Needs visibility. Needs sustained trading above par. Le projects it will be a “big product” in 2025, but product launches and product adoption are different things.
For now, Strategy has a plan: transition to preferred capital, avoid dilution, ignore distractions. Whether the market embraces Stretch determines if the plan works.
Next test: does STRC hold $100 when Bitcoin tests $65,000 again?
