Foreign media reports that Strategy's preferred stock, STRC, used to raise funds to buy Bitcoin, has fallen to a record low, prompting the market to reassess the pressure on the company's capital structure. Analysts believe that if its dividend coverage continues to be questioned, Strategy may face pressure to sell more Bitcoin, an expectation that has already spread to MSTR and BTC.
Concerns rise after STRC falls below par value
The report noted that STRC had been trading near its $100 face value for a long time, but began to weaken significantly after Strategy sold 32 bitcoins at the end of May. During the same period, influenced by broader market risk aversion, bitcoin briefly fell back and tested below $60,000, while STRC also dropped to around $90.
Subsequently, market concerns rose regarding Strategy's ability to consistently fulfill its STRC and other preferred stock dividend obligations. The article stated that the company had used some of its reserve funds originally earmarked for dividend arrangements to alleviate its debt burden, resulting in a shortened dividend coverage period of approximately seven months.
Bitcoin stabilized after being replenished.
Reports indicate that the STRC experienced a brief rebound in early June, following Strategy's buyback of 1,550 bitcoins and increase of its dollar reserves. This action initially eased market concerns about liquidity but failed to reverse the recent downward trend.
As of Thursday, the STRC had fallen to $82.50, about 18% below its $100 face value. Analysts believe this deviation is not just driven by macro sentiment, but also reflects investors' direct concerns about its dividend protection and capital arrangements.
Analysts worry about dragging down MSTR and BTC.
QCP analysts say that if the market continues to worry about STRC’s ability to cover dividends, Strategy may be forced to sell more Bitcoin to fulfill its obligations, which would limit Bitcoin’s upside potential in the short term.
Arca's Chief Investment Officer, Jeff Dorman, attributed the current uncertainty to the capital arrangements of Strategy's executive team. He believes that if the company cannot stabilize the STRC price and alleviate market concerns as soon as possible, other parts of its capital structure may continue to be under pressure.
- MSTR fell by about 15% in a week.
- BTC fell by approximately 3.25% during the same period.
- STRC fell by approximately 6% during the same period.
This comparison shows that MSTR's decline was significantly greater than Bitcoin's, and STRC's decline was also stronger than BTC's. Foreign media believe this indicates that the market has begun to view the pressure from STRC as one of the short-term risks facing Strategy's overall funding structure and Bitcoin holding strategies.
