Foreign media report that STRC, a preferred stock issued by Strategy to raise funds for Bitcoin purchases, has fallen to a historic low, prompting the market to reassess the strain on the company’s capital structure. Analysts believe that if the company’s ability to cover dividends continues to be questioned, Strategy may face pressure to sell more Bitcoin—a expectation that has already been transmitted to MSTR and BTC.
Concerns rise after STRC falls below par value
The report noted that STRC had long traded close to its $100 face value, but began to weaken significantly after Strategy sold 32 bitcoins at the end of May. During the same period, influenced by broader market risk-off sentiment, Bitcoin briefly retreated and tested below $60,000, causing STRC to drop to around $90.
Subsequently, market concerns grew over Strategy’s ability to consistently fulfill its dividend obligations for STRC and other preferred shares. The article stated that the company had used a portion of the reserve funds originally allocated for dividend distributions to alleviate its debt burden, reducing the coverage period for these dividends to approximately seven months.
After replenishing Bitcoin, it briefly stabilized.
Reports show that STRC experienced a brief rebound in early June amid Strategy's repurchase of 1,550 bitcoins and an increase in its USD reserves. This move temporarily eased market concerns about liquidity but failed to reverse the recent downward trend.
As of Thursday, STRC dropped to $82.50, approximately 18% below its $100 face value. Analysts believe this deviation is no longer driven solely by macro sentiment but reflects investors' direct concerns regarding its dividend security and capital structure.
Analysts are concerned about the drag on MSTR and BTC.
QCP analysts stated that if the market continues to worry about STRC’s ability to cover its dividends, Strategy may be forced to sell more Bitcoin to fulfill its obligations, which could limit Bitcoin’s upside potential in the short term.
Arca’s Chief Investment Officer, Jeff Dorman, attributes the current uncertainty to the capital structure of Strategy’s execution layer. He believes that if the company fails to quickly stabilize the STRC price and alleviate market concerns, other components of its capital structure may continue to face pressure.
- MSTR fell approximately 15% over the past week.
- BTC declined by approximately 3.25% during the same period.
- STRC declined by approximately 6% during the same period.
From this comparison, MSTR has declined significantly more than Bitcoin, and STRC has also fallen more sharply than BTC. Foreign media believe this indicates that the market is beginning to view the pressure on STRC as one of the short-term risks facing Strategy’s overall financing structure and Bitcoin holding strategy.