Strategy’s preferred stock STRC is in a sustained de-anchoring phase. U.S. equity market data show that since May 15, STRC has gradually moved away from its $100 target par value. The discount widened sharply in recent trading, with the stock touching an intraday low of $83.26 yesterday before closing at $88.59. That closing price left STRC more than 11% below its target value.
For an ordinary equity, an 11% decline may not define the entire investment case. For STRC, however, the issue is more fundamental. The product was not designed as a highly volatile speculative asset. Strategy structured STRC as an income-oriented security intended to trade around its $100 par value. The growing gap between the market price and that target therefore challenges the core design of the instrument and has led investors to reassess the logic behind the product.
The $100 anchor behind STRC
STRC was introduced by Strategy in 2025 as an innovative financial derivative. Unlike Strategy’s common stock MSTR, STRC is positioned as a perpetual preferred stock with a fixed target par value of $100 and a relatively stable dividend yield. In that sense, it is closer to a security with fixed-income characteristics than to common equity.
Within Strategy’s expanding balance-sheet loop, STRC is not merely another financing channel. It has become one of the strongest engines in the company’s capital flywheel. Before STRC, Strategy mainly relied on convertible notes and direct common-stock issuance to raise funds for Bitcoin purchases. Both routes came with constraints: convertible notes are limited by maturity dates and debt leverage thresholds, while frequent common-share issuance dilutes existing shareholders.
STRC was designed to address those constraints. The loop can be summarized as issuing STRC, raising fiat capital, purchasing BTC, increasing corporate net assets, and strengthening confidence in STRC. The model appears capable of repeating as long as market confidence remains intact. But that loop depends on STRC staying near its $100 par value. Once the market price sits far below $100, ATM issuance terms and arbitrage logic make it difficult for Strategy to raise capital efficiently through discounted preferred shares. In practice, the capital mechanism can stall.
A higher dividend has not restored the peg
To keep STRC’s secondary-market price close to its $100 target, Strategy introduced a mechanism for monthly dynamic dividend-rate adjustments. When STRC trades below $100, the company can raise the dividend rate to make the product more attractive. When the price trades above $100, the company can lower the dividend rate. In theory, repeated adjustments should allow STRC to remain near $100 over the long term.
That mechanism is now under pressure. Strategy has already raised the dividend rate to 11.5% and changed the payment frequency from monthly to semi-monthly, yet STRC has not effectively returned to its anchor. The failure of dividend adjustments to repair the discount suggests that the market is pricing risks beyond the yield itself.
The first layer is technical. Some market participants have attributed much of the recent decline to a concentrated deleveraging among arbitrage funds. Over the past year, STRC often traded near $100, attracting income-oriented arbitrage capital. These strategies frequently used leverage to amplify returns, collecting dividends while also seeking the spread from a return toward par. Once STRC broke below $100 and continued to weaken, some leveraged accounts hit risk-control thresholds and were forced to sell. Falling prices then triggered more liquidation among leveraged holders, creating a chain reaction in which selling pressure reinforced itself and pushed the decline beyond normal supply-and-demand moves.
Cash coverage versus Bitcoin reserves
Technical deleveraging alone does not fully explain the current market behavior. A deeper concern centers on Strategy’s liquidity reserves. Earlier this month, JPMorgan published a research report stating that Strategy has about $1.7 billion in annual dividend payment obligations. Based on its current cash reserves, the report said the company’s book cash would cover only about 6.3 months of preferred-stock dividend payments.
Strategy has presented a very different interpretation. In an official post on X, the company emphasized that if its large Bitcoin reserves are included, those reserves would be enough to cover 32 years of dividend payments. This difference in framing goes to the most sensitive part of the debate: whether investors should view Strategy’s Bitcoin holdings as strategic reserves or as a source of liquidity for obligations tied to its securities.
The sensitivity increased after Strategy sold part of its Bitcoin holdings earlier this month for the first time. The sale involved only 32 BTC, and the company described it as an active market desensitization test while also saying that it would buy back more in the future. Even so, the move had a strong effect on the market narrative. For years, Strategy and founder Michael Saylor had communicated a central message: Bitcoin is a long-term strategic reserve asset, and the company would use capital-market financing for operating funds rather than relying on Bitcoin sales.
When the market saw Strategy actually sell Bitcoin for the first time, investors had to reconsider the risk profile of related securities. If financing conditions tighten in the future, the question becomes whether Strategy would need to rely further on Bitcoin sales to meet dividend obligations. The continuing discount in STRC is therefore not only a judgment on one preferred stock. It is also a reassessment of the robustness of Strategy’s broader capital structure.
The financing flywheel faces a re-anchoring test
For Strategy, the largest consequence of STRC’s persistent de-anchoring is the weakening of its financing function. In recent years, the company expanded its Bitcoin reserves by raising capital through common shares, convertible notes, preferred stock, and other securities, then using the proceeds to buy more BTC. STRC has become one of the most important financing tools in that framework. When it trades below the $100 target par value for an extended period, the market is demanding higher risk compensation, and Strategy’s ability to raise capital through that channel enters a temporary pause.
The state of STRC’s re-anchoring will serve as an important indicator for how the market views Strategy’s risk. If STRC remains discounted and financing capacity stays constrained while cash reserves continue to be consumed, concerns about Strategy selling more Bitcoin to meet dividend needs would grow. The effects would not be limited to STRC. As one of the most important marginal buyers in the Bitcoin market over the past several years, Strategy’s financing capacity and pace of accumulation have shaped supply-and-demand expectations. If Strategy’s buying turns into selling, the downward pressure described in the original analysis would extend beyond the preferred stock itself.