STRC Preferred Plunges to $82.53, Dragging Strategy Shares

Strategy’s preferred stock, STRC, dropped to an intraday low of $82.53 on Thursday, weighing on the company’s common shares. The preferred later recovered toward $87.45 during the same trading session.

STRC has not traded at its $100 par value since mid-May. The preferred typically weakens after its ex-dividend date. The company is expected to distribute roughly $100 million to preferred shareholders at the end of the month tied to the next payout.

Analysts pointed to uncertainty about how Strategy will fund rising fixed obligations as a key factor behind the sell-off. James Butterfill, head of research at CoinShares, noted that uncertainty around cash management, rather than Bitcoin’s price alone, has driven investor concern. He added, ‘A Bitcoin rebound improves the value of the assets supporting Strategy, but it does not automatically increase the cash available.’

Earlier in the year the firm set aside $2.25 billion in cash reserves to cover debt and dividends. After repurchasing some debt at a discount, the cash buffer is about $1.1 billion.

STRC is structured to trade around par and includes mechanisms to attract buyers when the price drifts below $100. The company has kept the preferred dividend rate near 11.5% for four months. Mark Palmer, managing director at Benchmark-StoneX, described the pattern as ‘the structure doing exactly what it was built to do’ and expects a dividend increase at the start of July to support the price toward par.

The preferred’s weakness also affected Strategy’s common stock, which fell to $109.36, a four-month low. Over the past month the ordinary shares declined about 32%, a larger drop than Bitcoin’s recent slide. Late last month the firm sold 32 Bitcoin for roughly $2.5 million, a preannounced liquidation intended to help meet preferred distributions.

The company posted on its social account that its Bitcoin reserve, about 846,842 BTC, provides multiple years of dividend coverage when compared with annual dividend and interest expenses. At recent prices that reserve was valued at about $53 billion.

Some market participants warned that large-scale liquidations could depress prices as the market absorbs additional supply. Butterfill added that he does not view the situation as existential but described it as a sign that the company’s financing model has become less efficient and that investors may require higher returns to accept the financing risk.

Investor focus will remain on the firm’s cash management, the upcoming distribution date and any decision on the preferred dividend rate.