The STRC preferred shares ($100 par) issued by Strategy Inc. have dropped to $88.59 amid Bitcoin's slump and shaken confidence, lifting the effective yield above 12.9%. The dividend mechanism depends on Bitcoin appreciation and external funding (e.g., ATM offerings).
However, the ATM program has paused, Bitcoin purchases have slowed, and small-scale Bitcoin sales have occurred to cover dividends. This has triggered concerns about a 'death spiral' or Ponzi structure. The key dispute is whether the company can meet dividend obligations without selling Bitcoin.
If Bitcoin prices remain low, the company's ability to sustain dividends via appreciation weakens, and limited financing may force more Bitcoin sales. A sustained sell-off could deepen the discount and create a negative feedback loop, the feared death spiral. Attention is on whether Strategy resumes funding and how its Bitcoin holdings change.