Farside warns Strategy’s 12% STRC dividend risks confidence

Farside Investors warned that Strategy’s plan to raise the STRC preferred dividend to 12% could erode investor confidence. The advisory firm flagged the security’s discretionary coupon and its $100 price-stability mechanism as structurally unstable and prone to a feedback loop that could increase cash outflows and amplify credit concerns.

STRC was issued with a price-stability feature designed to guide the market price toward $100 by letting Strategy raise the dividend when STRC trades below $100 and lower it when it trades above $100. Farside argued that raising the dividend to defend the price would raise cash outflows and could heighten doubts about the company’s credit strength. The coupon is discretionary, not fixed, which Farside said creates valuation uncertainty for investors.

Farside ran two valuation scenarios to show the range of possible outcomes. Using an assumption that STRC keeps paying an 11.5% dividend and an 8% discount rate, the firm put an indicative value at about $144. Under an alternative assumption that Strategy can cut the coupon by 25 basis points each month down to Secured Overnight Financing Rate (around 3.6%), the value falls to about $55. STRC traded near $75 before recovering to about $86 in trading on July 1, 2026, which Farside said indicates the price-stability mechanism is under strain.

Strategy has announced a broader capital plan that includes building a U.S. dollar reserve, raising the STRC dividend to 12%, repurchasing preferred securities at a discount and authorizing bitcoin sales to fund dividends and reserves. For years the company issued equity at a premium to its bitcoin holdings and used proceeds to buy more bitcoin; under the new framework the company plans to actively manage its bitcoin treasury, including sales and repurchases to meet balance-sheet needs.

Andrei Grachev, managing partner at DWF Labs, described the change as a managed shift rather than a fire sale and commented: “Strategy is doing something with bitcoin: shifting it from a reserve you simply hold and never touch, to one you actively manage, selling, buying back, and funding when it serves the balance sheet. The asset stays central; the discipline around it changes completely.”

Farside urged two likely long-term fixes: buy back STRC at discounts or drop the $100 price-stability mechanism and peg the coupon closer to SOFR. The firm added that doing nothing would only delay the issue. Farside also noted that borrowing at roughly 11.5% to buy bitcoin is unattractive on simple financial terms and could force asset sales during market weakness, increasing downside risk.

STRC’s structure-a discretionary coupon with monthly cut provisions and an explicit $100 price target-has produced a wide valuation split among investors because future payouts depend on issuer decisions. Strategy’s shift from steady accumulation to active balance-sheet management changes how the company will use its bitcoin holdings and financing tools.