Strategy saw a silver lining after the latest market downturn. The STRC preferred stock returned above $100, allowing more selling and potential $BTC purchases.
After two weeks of dormancy, Strategy’s STRC returned to above $100 valuations. At this price range, Strategy can sell more preferred shares, boosting its ability to not skip weekly $BTC purchases.
STRC is one of the solutions for tapping the MSTR common stock facility, which has led to fast dilution. However, Strategy tries to sell STRC in a tight range, with new additions only when the price rises above $100. In this price range, selling STRC slightly decreases its value, while leaving Strategy with extra funds for $BTC purchases.
The STRC preferred stock still has to pay out 11.25% in mandatory monthly dividends, which puts a dent into Strategy’s cash pile. For now, Strategy has set up reserves to serve its obligations and debt while waiting for a better time for $BTC.
STRC rises to $100.03
On Thursday, STRC rose above $100, entering the range between $99 and $101, at which Strategy may extend selling.
In the past week, Strategy achieved $13M in STRC volume above $100 on Wednesday, and another $193M on Thursday. This amount was enough to buy 49% of the $BTC mined in the past week.
STRC returned above $100, allowing Strategy more access to capital, while buyers receive an 11.25% dividend paid out monthly. | Source: BitcoinQuant.
In total, STRC sales may allow for the purchase of 1,557 $BTC. For now, this amount is relatively small and does not affect the market, which sees even bigger selling pressure.
Despite this, STRC is heavily advertised, and some investors may switch to the preferred dividend stock at a time of higher market volatility.
STRC supporters claim the undervalued $BTC is a call to switch to the preferred stock. For some, the dividend is used to buy the dip on $BTC, while retaining their initial value. In this way, the cash reserves of Strategy are also redirected into $BTC, while awaiting a recovery.
Is STRC viable?
Supporters may use STRC for compounding or waiting out for a bull market in $BTC. The success of Strategy’s preferred stock still depends on a $BTC bull market. In the long term, Strategy expects $BTC performance to offset the dividends paid for STRC.
However, Strategy will still require cash, and for now, no cash has been raised from $BTC sales. Strategy has claimed its playbook can survive as long as $BTC stays above $8,000, by securing accessible capital through STRC and, more recently, the Euro-denominated SATA.
In February, MSTR common stock held above $123. Hypothetically, the common stock may appreciate in a positive $BTC scenario, allowing Strategy to raise additional funds. For now, there are still fears that a protracted bear market can break Strategy’s playbook.
