Saylor Points to Income as Bitcoin Slides
On Nov. 14, Michael Saylor, founder and executive chairman of Strategy Inc. (Nasdaq: MSTR), compared STRC’s returns with bitcoin’s price performance on X. STRC, also known as Stretch, is the company’s preferred stock, which has a dividend rate the company can adjust. The figures covered one week, one month, three months and one year.
He outlined his digital credit model:
“Bitcoin is Digital Capital. Strategy transforms it into Digital Credit. Over the past month, bitcoin fell 17.3%. STRC’s price was essentially flat, and dividends brought its total return to +1.0%.”
The chart shows STRC returned 0.3% over one week and 13.4% over one year, while bitcoin fell 9.1% and 29.8%, respectively. Over three months, bitcoin gained 8.7%, more than STRC’s 7.5% return. The figures used data through 4 p.m. Eastern time on Nov. 13 and included STRC dividends without assuming the payouts were used to buy more shares.
At the time of writing, bitcoin was trading at $64,428, down 5.85% over 24 hours, according to market data updated at 4:26 p.m. Eastern time on Nov. 14. It had fallen 14.37% over seven days, 21.21% over one month and 32.22% over one year. The latest monthly decline was greater than the 17.3% drop in Saylor’s comparison, which used data through the previous day.
STRC’s 12% Rate Depends on Corporate Funding
Strategy’s STRC market metrics showed a closing price of $99.91 on Nov. 13 and a 12% variable annualized dividend rate. At 12%, the dividend would amount to $12 a year for each $100 stated amount per share, if the rate remains unchanged.
Preferred shares give their owners a financial claim on the issuer, while direct bitcoin ownership gives the holder the cryptocurrency itself. STRC distributions depend on corporate funding, and the stock’s trading price can move independently of bitcoin.
Economist Peter Schiff criticized the funding requirements, questioning the assumptions behind STRC payments on Nov. 12 and challenging expectations that long-term bitcoin appreciation could sustain the model. His criticism focused on whether payments could be maintained, while Saylor’s latest chart measured historical investor returns.
Strategy Continues Share Repurchases as Bitcoin Holdings Lose Value
The company financed its latest bitcoin purchases and preferred-share repurchases through common-stock sales. From Nov. 2-8, Strategy bought 1,036 $BTC for $81.9 million. It also spent $188.3 million to repurchase 1,887,464 of its own STRC shares.
As bitcoin declined, the value of Strategy’s holdings fell further below their acquisition cost. Applying a price of $64,428 to its disclosed 850,364 $BTC gives an estimated value of about $54.79 billion, compared with a purchase cost of $64.16 billion. Based on its last reported holdings, that implies an unrealized loss of about $9.37 billion.
Separate dollar reserves and dividend funding supported the company’s payment obligations. As of Nov. 8, Strategy had a designated $4.77 billion reserve for preferred-stock dividends and debt interest, as well as $146.2 million in separate cash. From Nov. 2-8, it used $21.1 million from the reserve to pay preferred-stock dividends.
