The preferred stock strategy of MicroStrategy is gaining new attention as STRC approaches $100 again this week.
This movement recalls the time in early November when STRC stock maintained $100 for 4 consecutive trading days, recording ATM (market sale) sales of about $100 million.
STRC preferred stock, MicroStrategy expanding Bitcoin holdings…minimizing dilution
Investors and analysts are focusing on this strategy that uses STRC preferred stocks to purchase additional Bitcoin. This method can provide significant benefits to shareholders while minimizing common stock dilution.
“If the BTC price trend is maintained, STRC is likely to approach $100 over the next nine trading days. The last time STRC reached $100 was in early November over about 4 trading days. As a result, approximately $100 million was generated from ATM sales. With upward momentum, Bitcoin is ready to move significantly.” – Cryptocurrency strategist Jeff Walton
Jeff Walton's remarks indicate the potential for repeated ATM capital raising at favorable premiums, suggesting that MicroStrategy can secure resources to further increase its Bitcoin holdings.
The STRC mechanism effectively applies leveraged Bitcoin investment methods. Shareholders benefit from the rise in Bitcoin prices while managing risk through structured preferred stock issuance.
As STRC reaches $100, it seems MicroStrategy will be able to replicate the success of ATM sales in early November. This could strengthen the company's Bitcoin holdings and raise investor expectations for a strong upward trend.
“The strategy sells $100,000 worth of STRC at an annual return of 11% and buys 1 Bitcoin for $100,000. The annual dividend payment obligation is $11,000. After 5 years, Bitcoin rises to $1 million. MicroStrategy now holds Bitcoin worth $1 million but paid $55,000 in STRC dividends. The net profit is $845,000 ($900,000 capital gains – $55,000 dividends = $845,000).” – Cryptocurrency financial analyst Mark Harvey
Mark Harvey emphasizes that this strategy can increase Bitcoin holdings while minimizing common stock dilution. Additionally, if Bitcoin rises above an annual dividend rate of 11%, shareholders will receive greater rewards.
Upward risk, not downward…Bitcoin rally driving MSTR strategy
Meanwhile, Arca CEO Jeff Dorman warned that some investors are focusing on incorrect risks. This comment arose in the context of concerns about exclusion from the MSCI index.
“People worry about the incorrect MSTR risk—being delisted from MSCI. This is not a big issue (it has a slight negative impact on the stock price but no effect on Bitcoin). Even if Bitcoin drops sharply, MicroStrategy is not significantly affected (they are not forced sellers. There are no contract conditions that force selling or require cash for more than 2 years). The real biggest risk is that even if Bitcoin skyrockets, MicroStrategy's stock price fails to keep up.” – Jeff Dorman
According to Dorman, if the strategy's MSTR stock price does not correlate with Bitcoin and trades well below mNAV (market net asset value), all discussions lose significance.
“If mNAV approaches below $0, funding through ATMs will become impossible, and selling Bitcoin may need to be considered for stock buybacks.” – Jeff Dorman
This shows that, unlike traditional risk structures, the biggest threat may not be the decline in Bitcoin prices, but rather the corporate stock prices that cannot keep up with the Bitcoin gains. Therefore, if the Strategy stock rises by 5%, substantial profits are expected for bullish investors.
“The strategy stock rose by 5% in one day. The interesting point is that with just the premium received by Saylor in one day, he could cover the annual dividend.” – Adam Livingston
Amid this trend, Livingston states that now is the right time to buy MSTR, emphasizing that volatility and preferred stock premiums can be used for dividends and reinvestment. This is because it can generate new funds without forced selling of Bitcoin.