When Strategy held its annual Strategy World conference in Las Vegas last month, the conversation shifted noticeably away from Bitcoin itself and toward the company’s variable-rate preferred share, STRC. According to TD Cowen managing director of equity research Lance Vitanza, nearly every other panel at the two-day event was devoted to the product. Vitanza told Decrypt that it was the first time the company made clear that STRC is where it is concentrating its marketing, promotion, and ecosystem-building efforts. Co-founder and Executive Chairman Michael Saylor still promoted Bitcoin, but STRC dominated the agenda.
STRC currently pays an annual dividend of 11.5% and is engineered to trade near its $100 par value. When the share price rises above par, Strategy issues additional shares to expand its Bitcoin holdings. If the price falls below par, the company can raise the dividend to generate demand and pull the price back toward the $100 target. Saylor has described the product as potentially appealing to a broad range of investors, including retirees, and has called it the company’s equivalent of an “iPhone moment.”
Since the Las Vegas conference concluded, Strategy has raised more than $1.5 billion through STRC, a figure representing 33% of the product’s total market capitalization when combined with its $2.5 billion public offering from the prior year. The company recently recorded its largest Bitcoin purchase of the year, acquiring more than $1.5 billion worth of the asset in a single week using proceeds from STRC sales. Strategy now holds 763,000 Bitcoin in its treasury.
The product has attracted imitators. Strive Asset Management, co-founded by Ohio Republican gubernatorial candidate Vivek Ramaswamy, launched a comparable instrument called SATA, which currently pays 12.75% annually. Strive has itself allocated $50 million to Strategy’s STRC. CEO Matt Cole told Decrypt that he views the opportunity as worth trillions of dollars and expects both STRC and SATA to play significant roles for years ahead. Strive and Strategy trade at slight premiums relative to their respective Bitcoin holdings, which has made issuing common shares to buy Bitcoin a less effective strategy for growing Bitcoin-per-share over time.
The conference also marked a milestone for OranjeBTC, a Brazil-based Bitcoin treasury firm that became the first company to publicly announce an allocation in STRC at the event. The firm, which holds 3,723 Bitcoin purchased at an average price of $105,000 each, committed $11 million to the product. Director of Bitcoin strategy Sam Callahan told Decrypt that STRC offers strategic advantages over traditional short-duration assets such as cash and U.S. Treasuries for covering fiat-denominated expenses. He also noted that OranjeBTC could potentially borrow against its Bitcoin holdings at a lower rate than STRC currently pays, allowing the firm to capture a spread.
Despite Saylor marketing STRC as “digital credit,” the instrument does not carry the legal protections associated with traditional debt. It is an unsecured asset with no pledged collateral, no security interest, and no guarantee tied to Strategy’s Bitcoin holdings or those of any other entity. Vitanza noted, however, that it is reasonable for Strategy to signal an indirect link to Bitcoin, given that the company has indicated it could draw on its $51 billion in holdings to redeem STRC investors if necessary, preserving its ability to access capital markets.
Strategy’s common shares have declined nearly 58% over the past six months to $138, according to Yahoo Finance, though TD Cowen analysts maintain a “Buy” rating on the stock with a price target of $440. The company currently carries $1 billion in annual dividend obligations and $8.2 billion in convertible debt beginning to mature in 2028. On Monday, Strategy purchased approximately 1,000 Bitcoin for $77 million using proceeds from common share sales. Bitcoin recently traded around $71,000, roughly 44% below its all-time high of $126,000 reached in October, according to CoinGecko. Vitanza said that if Bitcoin’s price recovers, Strategy could reduce STRC’s dividend to around 8.5%, which he described as a sign the instrument would have become safer over time.
Originally reported by Decrypt.
