Strategy’s preferred stock STRC is now trading well below the $100 target par value around which it was designed to operate. U.S. market data show that since May 15, STRC has gradually moved away from that level. The discount widened sharply in recent trading: the security touched an intraday low of $83.26 yesterday and closed at $88.59, putting it more than 11% below its target par value.
For an ordinary equity, an 11% decline would not necessarily be exceptional. STRC, however, was not designed as a high-volatility speculative stock. Strategy built it as an income-oriented security intended to trade near a fixed $100 par value. The larger and more persistent the gap between market price and target value becomes, the more investors are forced to revisit the logic behind the product and the broader financing model that supports it.
Why STRC’s Anchor Matters to Strategy
STRC is an innovative financial derivative introduced by Strategy in 2025. Unlike Strategy’s common stock MSTR, STRC is structured as a perpetual preferred stock. It has a fixed target par value of $100 and a relatively stable dividend yield, giving it characteristics closer to a fixed-income instrument than to a common share.
Within Strategy’s balance sheet expansion loop, STRC is not merely another financing channel. It has become one of the strongest engines of the company’s capital flywheel. Before STRC was launched, Strategy mainly raised funds to buy Bitcoin through convertible notes and direct common-share issuance. Those methods had clear limits: convertible notes are constrained by maturity dates and debt leverage limits, while frequent common-share issuance dilutes existing shareholders.
STRC was designed to address that problem. Strategy can issue STRC, raise fiat capital, buy BTC, lift the company’s net asset base and reinforce market confidence in STRC. This creates a closed loop that appears capable of being repeated. The essential condition, however, is that STRC must remain near $100. Once its market price is materially below that level, ATM issuance terms and market arbitrage logic make it difficult for Strategy to raise fresh capital through discounted preferred stock. The financing mechanism then slows or stalls.
The Dividend Adjustment Mechanism Has Not Restored the Peg
To keep STRC’s secondary-market price close to its $100 target, Strategy introduced a monthly dynamic dividend-rate adjustment mechanism. In simple terms, when STRC trades below $100, the company can raise the dividend rate to make the product more attractive. When STRC trades above $100, it can reduce the rate. In theory, repeated dividend adjustments should keep STRC trading around par over the long run.
That mechanism is now under pressure. Strategy has already increased the dividend rate to 11.5% and changed the payout schedule from monthly to semi-monthly. Even with those changes, STRC has not effectively returned to its target par value. This suggests that the risk currently being priced by the market extends beyond the yield level itself.
Deleveraging Pressure and Liquidity Concerns
The first layer of concern is technical. Some market participants attribute a large part of the recent decline to a concentrated deleveraging event among arbitrage capital. Over the past year, STRC had traded for long periods near $100, attracting income-focused arbitrage funds. These investors often used leverage to enhance returns, collecting dividends while also seeking gains from price convergence back toward par.
Once STRC fell below $100 and continued weakening, some leveraged accounts began to hit risk-control thresholds and were forced to sell. The resulting price decline then triggered additional liquidations, creating a chain reaction. In that process, selling pressure reinforced itself, pushing the decline far beyond what would be expected from ordinary supply-and-demand changes alone.
For many investors, however, technical deleveraging does not fully explain the situation. The deeper concern is Strategy’s liquidity reserve position. 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 cash on hand would cover only around 6.3 months of preferred-stock dividend expenses.
Strategy offered a sharply different explanation. In a post on X, the company emphasized that if its large Bitcoin reserves are included in the calculation, those reserves would be sufficient to cover 32 years of dividend payments. That response goes directly to the market’s most sensitive question: whether Bitcoin reserves are merely strategic holdings, or whether they could become part of the company’s liquidity coverage.
The Bitcoin Reserve Narrative Is Being Tested
Earlier this month, Strategy sold part of its Bitcoin holdings for the first time. The sale involved only 32 BTC, and the company described it as an active market desensitization test, while also saying it would buy back more in the future. Even so, the sale had a strong effect on market sentiment because Strategy and its founder Michael Saylor have spent years reinforcing a central narrative: Bitcoin is a long-term strategic reserve asset, and the company obtains operating funds through capital markets rather than by selling Bitcoin.
Once the market sees Strategy actually sell Bitcoin, a larger question follows. If the financing environment tightens, will Strategy have to rely further on Bitcoin sales to meet dividend obligations? If the answer is not an absolute no, investors must reassess the risk level of the company’s related securities.
Viewed from this angle, STRC’s persistent discount is not only a pricing issue for one preferred stock. It is a reassessment of the robustness of Strategy’s entire capital structure. The immediate impact on Strategy is the weakening of STRC’s financing function. If STRC trades below $100 for an extended period, the market is demanding higher risk compensation, and the company’s ability to use this instrument for fundraising becomes constrained.
Going forward, whether STRC can return to its anchor will be an important indicator for how the market judges Strategy’s risk profile. If the discount persists, financing capacity remains limited and cash reserves continue to be consumed, concerns over additional Bitcoin sales to meet dividend obligations will intensify. Strategy has been one of the most important marginal buyers in the Bitcoin market over the past few years. Its financing capacity and accumulation pace have shaped supply-and-demand expectations; if that bid turns into selling pressure, Bitcoin would face a heavier downside burden.