STRC, a preferred stock with a par value of $100 issued by Strategy Inc., has recently fallen below its face value to $88.59 as Bitcoin's sharp decline erodes market confidence. The discount pushes its effective yield above 12.9%. Notably, the issue price of STRC was originally determined through discussions with ChatGPT, adding a layer of narrative to this financial instrument.
STRC's operational mechanism heavily depends on Bitcoin's continuous appreciation and sustained financing through at-the-market (ATM) equity offerings to maintain its dividend payments. Strategy Inc. has historically accumulated a large Bitcoin treasury, and STRC's dividends are largely funded by the appreciation of those Bitcoin holdings along with convertible bonds and ATM stock issuances. However, the current situation has shifted: ATM issuances have been paused, Bitcoin purchases have slowed, and small-scale Bitcoin sales have already occurred to cover dividend payments. This change has sparked market concerns that STRC could enter a “death spiral” and that its structure may resemble a Ponzi scheme.
The core point of divergence between bulls and bears is whether Strategy Inc. can fulfill its dividend obligations without selling Bitcoin. This will serve as the key observation point for STRC's future trajectory.