The STRC preferred stock (face value $100) issued by Strategy Inc. has recently come under market scrutiny. Amid a sharp decline in Bitcoin prices and shaken investor confidence, the stock is now trading at a discount of $88.59, pushing its effective yield above 12.9%. The structure of this preferred stock relies on Bitcoin appreciation and ongoing external financing (such as ATM share issuances) to maintain dividend payments.
However, Strategy has currently suspended its ATM offering plan, slowed down Bitcoin purchases, and even initiated small-scale Bitcoin sales to cover dividends. These developments have sparked serious doubts about the sustainability of the preferred stock. Some market participants warn of a potential "death spiral" — where falling stock price forces the company to sell Bitcoin for dividends, further depressing both the stock and Bitcoin prices in a vicious cycle. Others draw comparisons to Ponzi-like structures.
The main point of contention between bulls and bears is whether Strategy Inc. can meet its dividend obligations without selling Bitcoin. This remains a key observation point going forward.