Strategy’s preferred stock STRC is moving through a sustained period of trading below its target par value. U.S. market data show that since May 15, STRC has gradually moved away from its $100 target face value. The discount widened sharply in recent trading: the security touched an intraday low of $83.26 yesterday and closed at $88.59, more than 11% below its target value. For an ordinary equity, an 11% decline would not necessarily redefine the investment case. For STRC, however, the issue is different, because the product was designed as an income-oriented security intended to trade around $100 rather than as a highly volatile speculative asset.
The widening gap between market price and target value has led investors to revisit the logic behind the product. It also matters because, as Strategy continues expanding its bitcoin reserves, STRC has grown into one of the company’s most important financing channels. In that sense, the market’s pricing of STRC reflects more than the attitude toward a single preferred stock; it also reflects confidence in Strategy’s broader capital operation model.
Why STRC sits at the center of Strategy’s capital loop
STRC was introduced by Strategy in 2025 as an innovative financial derivative. Unlike Strategy’s common stock MSTR, STRC is structured as a perpetual preferred stock with a fixed target face value of $100 and a relatively stable dividend yield. Its characteristics are therefore closer to a fixed-income-style security. Within Strategy’s balance-sheet expansion loop, STRC is not merely another funding tool. It functions as one of the strongest engines in the company’s current capital flywheel.
Before STRC was launched, Strategy mainly relied on convertible notes and direct issuance of common stock to raise funds for bitcoin purchases. Both methods had limitations. Convertible notes are constrained by maturity dates and debt leverage ceilings, while frequent common-stock issuance dilutes existing shareholders. STRC was designed to address this problem by creating a loop: issue STRC, raise fiat currency, buy BTC, increase the company’s net assets, and strengthen confidence in STRC. Through this sequence, Strategy built a capital flywheel that appeared capable of repeating itself.
The key condition for that flywheel to operate smoothly is that STRC must remain close to its $100 face value. Once the market price falls significantly below $100, Strategy cannot effectively raise capital from the market by issuing discounted preferred stock under ATM issuance terms and market arbitrage logic. In practical terms, the capital mechanism would slow down or stall. To keep STRC’s secondary-market price aligned with the $100 target, Strategy introduced a monthly dynamic dividend adjustment mechanism. When STRC trades below $100, Strategy can raise the dividend rate to improve the product’s appeal; when it trades above $100, the company can lower the rate.
An 11.5% dividend has not restored the peg
The current difficulty is that this mechanism has not repaired the dislocation. Strategy has already raised the dividend to 11.5% and changed the payment frequency from monthly to semi-monthly, yet STRC has remained below its target. When dividend adjustments fail to restore the price anchor, it indicates that the market is pricing risks beyond the yield level itself. Current market discussions point to two layers of concern, beginning with a technical factor: a concentrated deleveraging event among arbitrage capital.
Over the past year, STRC traded for a long period around $100, attracting large amounts of income-oriented arbitrage capital. Such capital often uses leverage to amplify returns, collecting dividend income while also seeking gains from the price returning to par. As STRC broke below $100 and continued to weaken, some leveraged accounts hit risk-control thresholds and were forced to sell positions. Falling prices then triggered further liquidations by other leveraged holders, creating a chain reaction. In this process, selling pressure became self-reinforcing, pushing the decline far beyond what normal supply-and-demand changes would explain on their own.
Liquidity reserves and the first bitcoin sale
Still, leverage-driven selling alone does not fully explain the market’s current reaction. For many investors, the deeper concern lies in Strategy’s liquidity reserves. Earlier this month, JPMorgan released a research report stating that Strategy has approximately $1.7 billion in annual dividend payment obligations. Based on the company’s current cash reserves, the report said its cash on hand would cover only about 6.3 months of preferred-stock dividend expenses. Strategy responded differently, emphasizing in a post on X that if its large bitcoin reserves are included, it has enough resources to cover 32 years of dividend payments.
That response goes directly to the most sensitive part of the debate. Earlier this month, Strategy sold bitcoin from its holdings for the first time. The scale was only 32 BTC, and the company described the move as an active market desensitization test while also saying it would buy back more in the future. Even so, the transaction had a strong impact on market perception. Over the past several years, Strategy and its founder Michael Saylor have repeatedly communicated a central narrative: bitcoin is a long-term strategic reserve asset, and the company obtains operating funds through capital-market financing rather than by selling bitcoin.
When the market saw Strategy actually sell bitcoin for the first time, investors began reassessing the risk profile of related securities. If financing conditions tighten, the key question becomes whether Strategy would need to rely further on selling bitcoin to meet dividend obligations. If the answer is not an absolute no, investors must reprice the risk of instruments linked to the company’s capital structure. From this perspective, STRC’s sustained break from its target value reflects a broader reassessment of the stability of Strategy’s financing model.
A weaker funding channel becomes the main pressure point
For Strategy, the largest consequence of STRC’s prolonged discount is the weakening of its financing function. Over the past few years, Strategy was able to keep expanding its bitcoin reserves because it raised capital through securities such as common stock, convertible notes and preferred stock, then used the funds to increase its bitcoin holdings. STRC is one of the company’s most important financing tools. When it trades for a prolonged period below the $100 target face value, the market is demanding higher risk compensation, and Strategy’s funding capacity is temporarily constrained.
The path of STRC back toward its target value has therefore become an important indicator for assessing Strategy’s risk condition. If STRC remains discounted for an extended period, financing capacity stays limited and cash reserves continue to be consumed, concern over Strategy selling more bitcoin to meet dividend payments will intensify. The effect would not be limited to STRC itself. Strategy has been one of the most important marginal buyers in the bitcoin market over the past several years, and its financing capacity and pace of accumulation have shaped supply-and-demand expectations. If the company’s buy-side role were to shift toward sell-side pressure, the STRC dislocation would become more than a preferred-stock pricing issue.