Foreign media reports that after Strategy's STRC preferred stock continued to fall below $100 par value, the market began to reassess the financing structure of this Bitcoin holding company. Arca's Chief Investment Officer, Jeff Dorman, believes that selling $3 billion to $4 billion worth of Bitcoin might be the most direct way to alleviate the pressure at present.
STRC falls below par value
On June 18, STRC briefly fell to $82.53 before recovering to close at $88.59, but remained significantly below par value. Dorman wrote on the X platform that this trend indicates investors are questioning the sustainability of the preferred stock arrangement, particularly regarding dividend obligations and subsequent financing costs.
Dorman proposes a cryptocurrency selling plan.
Dorman believes that while selling some Bitcoin might suppress the price in the short term, it would buy the Strategy more time and alleviate pressure on the capital structure. He gave this scenario a 25% probability and stated that it would not fundamentally change the company's long-term Bitcoin strategy.
However, he judged that the more likely scenario was that Strategy would continue to sell a small number of MSTR shares to raise funds. He set the probability of this scenario at 70%, but believed that such financing would not be favorable to existing shareholders.
Dividends and financing costs are under scrutiny.
Controversy surrounding Strategy's funding model has been escalating recently. Previously, Peter Schiff accused co-founder Michael Saylor of downplaying the risks associated with STRC, particularly for return-seeking investors.
Schiff believes that if risk disclosures are insufficient, some retirement and income-oriented investors may consider legal action. He also warns that if STRC remains below par value for an extended period, investors may demand higher yields during future refinancing, further increasing financing costs.
Dorman also mentioned an extreme scenario with a probability of only 5%, in which the company ceases payment arrangements related to preferred securities. He considered this option a last resort, reflecting the deepening market concerns about dividend burdens.
QCP mentions liquidity duration
Market maker QCP had previously warned about Strategy's liquidity. QCP estimated that the company's current available liquidity could only support about seven and a half months of preferred stock dividend payments. If the attractiveness of existing financing channels continues to decline, the company may eventually need to find alternative sources of funding, and selling Bitcoin would be one option.
Regarding valuation, Dorman believes Strategy's current share price is still too high. He estimates that the company holds approximately $35.2 billion in unrestricted Bitcoin collateral, while MSTR's equity market capitalization is approximately $40.4 billion, corresponding to approximately 1.15 times its net asset value.
Based on this metric, he believes MSTR should be trading below its net asset value. If Bitcoin prices fail to rebound significantly, the share price may continue to be under pressure; even if Bitcoin recovers, the potential upside depends on whether the company can avoid further dilution, including the impact of dividends, asset sales, or new financing.
