Strategy’s preferred stock STRC is in a sustained state of de-anchoring from its intended par value. U.S. market data show that since May 15, STRC has gradually moved away from its $100 target face value. The discount has 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 stock, an 11% move would not necessarily be extraordinary, but STRC was not designed as a high-volatility speculative equity. It was created as an income-oriented security intended to trade near $100.
STRC’s anchoring mechanism is under pressure
STRC was launched 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 $100 target face value and relatively stable dividend income. In practical terms, it resembles a security with fixed-income characteristics. Within Strategy’s balance-sheet expansion loop, STRC is not merely another funding channel; it has become one of the strongest engines in the company’s capital flywheel.
Before STRC was introduced, Strategy mainly relied on issuing convertible notes and directly selling additional common shares to raise money for Bitcoin purchases. Both approaches had constraints. Convertible notes are limited by maturities and debt leverage ceilings, while frequent common stock issuance dilutes existing shareholders. STRC addressed this pain point by creating a financing loop: issue STRC, raise fiat currency, buy BTC, increase the company’s net assets and reinforce confidence in STRC. That structure allowed Strategy to build what appeared to be a repeatable capital cycle.
The smooth operation of that flywheel depends on one key condition: STRC must remain close to its $100 par value. Once the market price falls meaningfully below $100, ATM issuance terms and market arbitrage logic make it difficult for Strategy to raise funds efficiently through discounted preferred shares. In that situation, the company’s broader capital mechanism faces an operational bottleneck. To keep STRC aligned with its target value in the secondary market, Strategy designed a monthly dynamic dividend adjustment mechanism. When STRC trades below $100, Strategy can raise the dividend rate to make the product more attractive; when it trades above $100, the dividend rate can be reduced.
Higher dividends have not restored the peg
In theory, this dividend adjustment mechanism should help STRC trade around the $100 level over the long term. The present price action shows that the mechanism is not delivering the intended repair. Strategy has already raised the dividend rate to 11.5% and changed the payment frequency from monthly to semi-monthly, yet STRC remains significantly below its target value. The failure of the dividend adjustment to restore the anchor indicates that the risk now being priced by the market extends beyond STRC’s headline yield.
One surface-level explanation discussed by market participants is a technical wave of deleveraging. Over the past year, STRC traded for a long period near $100, attracting a large amount of income-oriented arbitrage capital. Such capital often uses leverage to amplify returns, collecting dividend income while also seeking gains from a move back toward par value. As STRC broke below $100 and kept weakening, some leveraged accounts hit risk-control thresholds and were forced to sell. The price decline then triggered additional liquidations among leveraged holders, producing a chain reaction in which selling pressure reinforced itself and pushed the decline beyond what ordinary supply-and-demand changes would suggest.
Liquidity reserves and Bitcoin sales enter the debate
Leverage unwinds alone do not fully explain the market’s response. A deeper concern centers on Strategy’s liquidity reserves. Earlier this month, JPMorgan released a research report stating that Strategy has about $1.7 billion in annual dividend payment obligations. Based on the current level of cash reserves, the company’s balance-sheet cash would cover only about 6.3 months of preferred stock dividend payments. Strategy offered a sharply 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 disagreement touches the most sensitive part of the Strategy story. Earlier this month, Strategy sold Bitcoin from its holdings for the first time, with the sale totaling only 32 BTC. The company framed the move as an active market desensitization test and said it would buy back more in the future. Even so, the sale had a strong impact on market perception. For years, Strategy and its founder Michael Saylor had delivered a central narrative to the market: Bitcoin is a long-term strategic reserve asset, and the company would obtain operating funds through capital markets rather than by selling Bitcoin.
Once the market saw Strategy actually sell Bitcoin, investors were forced to reassess the risk profile of related securities. If financing conditions tighten in the future, the key question becomes whether Strategy would need to rely further on Bitcoin sales to meet dividend obligations. The answer matters because STRC’s sustained discount is not only about a preferred stock trading below par; it reflects a broader reassessment of the stability of Strategy’s capital structure.
A weaker STRC would limit Strategy’s financing function
For Strategy, the largest direct impact of STRC’s continuing de-anchoring is the weakening of its financing function. In recent years, Strategy expanded its Bitcoin reserves by issuing securities such as common stock, convertible notes and preferred shares, then using the proceeds to buy Bitcoin. STRC is one of the company’s most important financing tools. When it trades for a prolonged period below its $100 target face value, the market is demanding higher risk compensation, and Strategy’s ability to finance through this product is temporarily impaired.
The return of STRC toward its target value will therefore serve as an important marker for how the market views Strategy’s risk profile. If STRC remains discounted for an extended period, financing capacity stays constrained and cash reserves continue to be consumed, concerns over additional Bitcoin sales to meet dividend payments will intensify. The impact of that expectation 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 accumulation pace have shaped expectations for supply and demand. If Strategy’s buying flow turns into selling flow, Bitcoin would face downward pressure from that shift.