STRC is continuously generating value through Strategy. Can the perpetual preferred stock model be sustained?

Zhuji, Golden Finance

Strategy hasn’t bought BTC in the past week. According to Bitcoin Treasuries data, Strategy’s most recent BTC purchase was on March 23.

On the surface, Strategy hasn’t bought BTC—but in reality, Strategy’s financing side is being strengthened, ready at any moment for its next purchase.

I. Strategy’s preferred stock plan

On March 13, Strategy’s perpetual preferred stock Stretch ($STRC) launched an at-the-market (ATM) offering, raising funds in a way that set a record high. Real-time tracking data shows that trading volume that day reached 7.3 million shares, and all of them met the activation threshold—equivalent to 471% of the average daily trading volume. This transaction made the ATM offering run for nine consecutive days, nearly double the previous day. The funds raised were enough to buy about 4,038 bitcoins. On the day, the STRC share price stayed stable at $100. Investors valued the lower volatility of preferred stock compared with Strategy’s common stock (MSTR).

STRC is a perpetual preferred stock with a par value of $100. Its payouts are used directly to accumulate bitcoin, while also providing a stable, high-yield income stream. The preferred stock uses a floating monthly dividend (currently an annualized yield of 11.5%), and includes an adjustment mechanism to keep the trading price close to par value. This “digital credit” structure appeals to fixed-income investors and allows Strategy to expand its bitcoin holdings without selling its existing bitcoin.

On March 26, Strategy’s perpetual preferred stock STRC completed another round of fundraising. The funding amount was sufficient to purchase 141 BTC.

At present, about 40% of Strategy (MSTR) shares are held by retail investors, while the retail holding ratio for STRC is as high as 80%.

Michael Saylor said: If bitcoin only rises 2% per year, Strategy will have the ability to pay dividends to its perpetual preferred stock forever—Stretch ($STRC).

II. STRC is continuously “creating blood” for Strategy

In February this year, Strategy CEO Phong Le said that the company is adjusting its strategy: rather than issuing common stock to fund its bitcoin purchases, it will issue more preferred stock. “Last year, Stretch and its perpetual preferred stock raised a total of $7 billion, accounting for 33% of the entire preferred stock market. In the time ahead this year, we expect structured products will become one of our major products. We will begin transitioning from equity capital to preferred stock capital.”

Strategy describes STRC as something like a short-term, high-yield savings tool. As a carefully designed “digital credit” instrument for Strategy, STRC is a perpetual, floating-dividend preferred stock with a par value of $100. Its core mechanism directly targets the goal of “dilution-free expansion of bitcoin positions.”

First, STRC achieves a funds closed loop: 100% of the proceeds go to bitcoin accumulation, without tying up the company’s existing cash flows. Second, it attracts ordinary investors with a high interest rate of 11.5%—effectively absorbing global retail cash flow through STRC, bypassing the traditional financing system and directly connecting to a pool of retail capital. Finally, Strategy has no obligation to repurchase the stock on any specific date. The funds can be used permanently for bitcoin holdings—fundamentally different from bonds that face maturity pressure.

For investors, STRC also works more like a BTC leverage channel: its returns come from the profitability of Strategy’s BTC asset, making it a high-yield product that indirectly bets on BTC. It is suitable for investors who both believe in BTC’s long-term appreciation potential and don’t want to hold BTC directly and endure its wild price volatility, while also seeking stable cash-flow returns.

III. Is Strategy’s bitcoin-buying model sustainable?

As STRC becomes Strategy’s core financing tool, a key question also comes up: Is the model of financing buys of BTC through high-yield perpetual preferred stock sustainable?

Since July last year, Strategy has officially issued STRC stock and conducted its first public offering. Over nearly a year, the model has continued.

In the long run, whether the current bitcoin-buying model can continue depends on whether STRC can continue to find buyers. If the STRC price falls below the $100 par value, the company would need to raise dividends to stabilize demand. That also means that if market demand weakens, Strategy’s financing capacity will decline, and its ability to buy BTC will be weakened. As a result, Strategy will stop adding to its BTC holdings, or finance in other ways.

Second, because STRC’s annualized yield is as high as 11.5%, Strategy is taking on extremely high financing costs. Although Saylor once argued that as long as BTC’s annual growth exceeds 2% it would work, the crypto market conditions have been poor for a long time, and there is no guarantee that market conditions will rebound afterward. In a high-volatility crypto environment, whether Strategy can always earn without losses is something that still needs to be validated over time.

Third, because Strategy’s balance sheet is highly concentrated in BTC, if BTC’s price undergoes a sharp drop, Strategy’s assets would shrink severely. But STRC still has to keep paying interest no matter what. This would further shrink Strategy’s assets, increase dividend pressure, and raise the leverage ratio. In a downtrend environment, STRC will amplify Strategy’s sensitivity to BTC prices.

Finally, Strategy is in a rolling financing state. What investors worry about is whether Strategy’s new financing can cover its old costs. The Financial Times pointed out: …… This self-reinforcing cycle is the core of the Strategy model: issue securities on favorable terms, use the proceeds to buy bitcoin and pay off previous amounts, then rely on market confidence to do it again. Whether funds can continue to flow in and whether market sentiment will keep providing support are all factors that affect the outcome.

In summary, whether Strategy can achieve sustainable financing right now depends on two key factors: BTC’s price trend and STRC’s financing capability. Strategy is both a large holder of BTC and a representative of BTC exposure.

While STRC gives Strategy the ability to expand its BTC position almost infinitely, that ability itself is built on the market’s continued willingness to “buy into” its “high-yield promise.”

If one day investors stop buying into it, then the model of “stepping on one foot and taking off on the spot” might need to change.