Analyst: Strategy’s STRC not comparable to Terra collapse

Benchmark-StoneX analyst Mark Palmer wrote that comparing Strategy’s Stretch preferred stock, STRC, to TerraUSD and LUNA is misguided. He described STRC as a dividend-paying security indirectly backed by Strategy’s Bitcoin holdings and not a stablecoin.

STRC fell to a low of $82.53 last week before recovering to about $88.65 on Monday, roughly 11.3% below its $100 par value. The preferred pays an 11.5% annual dividend and was designed to trade near par; its price has oscillated since the product launched less than a year ago.

Palmer outlined how the preferred’s mechanics work. When STRC trades at or above $100, Strategy issues additional preferred shares and uses proceeds to buy more Bitcoin. With STRC below par, that funding channel becomes less able to finance new purchases.

“There is a meaningful difference between stating that Strategy’s preferred stock funding engine has become less efficient, and asserting that the company’s overall model is broken,” Palmer wrote.

Strategy, based in Tysons Corner, Virginia, reported holding 847,363 Bitcoin, a position valued at about $54.5 billion when Bitcoin traded near $64,400. The company has increased its U.S. dollar reserve for three consecutive weeks to support dividend payments if STRC remains below par.

Benchmark-StoneX kept a $570 price target for Strategy’s common stock. On Monday, Strategy’s common shares fell 2.8% to $109, the fifth straight trading day of declines.

The discussion about STRC drew comparisons on social media to the 2022 collapse of Terra’s ecosystem. Palmer and Benchmark-StoneX noted key differences: TerraUSD relied on a mint-and-burn link with LUNA and had no hard reserves, while STRC is not backed by an algorithmic arbitrage mechanism and does not depend on confidence in a reflexive token structure.

Investors and analysts are monitoring whether STRC’s discount to par will narrow and whether Strategy will change its dividend rate or use other funding levers.