Analyst: Investors Misprice STRC’s Perpetual Risk

Matt Dines, chief investment officer at Build Markets, warned that investors are mispricing the infinite-duration risk in Strategy’s Variable Rate Series A Perpetual Stretch Preferred Stock (STRC). He noted the instrument has no maturity date, leaving holders dependent on the secondary market to recover principal and exposed to ongoing liquidity and interest-rate risks. STRC recorded $1.5 billion in daily trading, a new high for the issue.

Perpetual preferred stocks do not require issuers to repay principal; issuers can continue paying dividends under the original terms indefinitely. Investors who need to recover principal must sell their shares on the secondary market, which can be impaired if liquidity tightens or if market yields rise.

Dines warned: “If spreads start to rise and the market demands higher yields from corporate borrowers, you also have to attach that to the infinite duration of the perpetual. So, if this dislocation comes in liquidity, it will come from the fiat side.”

Strategy has relied on preferred stock issuance to help fund its Bitcoin purchases. At the time of publication, STRC traded near $99 per share and carried a variable dividend rate of 11.5% that resets monthly. Strategy has opened voting for common equity and STRC holders to approve semi-monthly dividend payments.

Market data shows the total notional face value of outstanding STRC shares is about $8.5 billion, with a total market value near $8.4 billion. Crypto research firm Delphi Digital estimates an authorized issuance cap for STRC of roughly $28 billion; if that cap is reached and not raised, Strategy’s ability to add to its Bitcoin holdings using STRC could slow within the next year.

Market participants note a tradeoff between the yield offered by perpetual preferreds and their open-ended duration risk, particularly in a rising-rate environment or if secondary-market liquidity tightens.