MicroStrategy Faces $1.5B Preferred-Dividend Cash Gap

Zach Pandl, head of research at Grayscale, warned that MicroStrategy faces roughly $1.5 billion in yearly preferred-stock dividend obligations while its 2025 software revenue was about $477 million. Pandl framed the situation as a cash-flow problem rather than an issue tied directly to bitcoin prices.

Pandl pointed to the preferred stack, which totals roughly $15.5 billion and has grown from about $730 million in early 2025. He noted that the company’s dollar-denominated payouts create a financing mismatch because bitcoin does not generate yield: “Bitcoin produces no yield. If the price doesn’t go up, there are only two ways to pay the coupon, and neither is clean.”

MicroStrategy’s preferred instruments include STRC, a variable-rate “Stretch” preferred carrying an annual rate near 11.5%, and STRK, which pays around 8%. Those dividend obligations of about $1.5 billion a year exceed the company’s software revenue by more than three to one. The company’s cash balance, near $1 billion, would cover less than a year of those payments at current levels.

In late May, MicroStrategy sold 32 bitcoin for about $2.5 million at an average price near $77,135 per coin. The firm described the sale as routine and said it expects to buy 10 to 20 bitcoin for each one it sells. Chairman Michael Saylor has expressed a desire for STRC to become “the best credit instrument in the world.” MicroStrategy has paused the at-the-market program used to issue STRC after the preferred fell well below the $100 level it was designed to hold and reached an intraday low of $82.53.

Market participants have offered different explanations for STRC’s price moves. Some attribute the drop to a leverage-driven liquidation cascade rather than an immediate cash-flow shortfall. Pandl countered that issuing new preferred shares to meet dividend obligations would widen the gap between dollar payouts and software revenue, raising the risk of a self-reinforcing cycle sometimes referred to as a “death spiral.”

Preferred shares pay fixed or variable dividends and rank above common stock in the capital structure. For a company holding an asset that produces no income, servicing large preferred coupons requires either selling bitcoin to raise cash or issuing additional financing. Selling converts unrealized gains into cash and can run counter to stated long-term strategies; issuing new preferred shares can increase the company’s payout burden and alter capital terms.

MicroStrategy’s financial models assume modest annual bitcoin appreciation can help cover dividend obligations. That assumption becomes strained during extended periods when bitcoin is flat or falling and dollar-denominated coupons remain due on a set timetable.