Last week, Strategy surpassed BlackRock to become the world’s largest institutional holder of bitcoin, following a remarkable acquisition spree that saw the company purchase $2.54 billion worth of bitcoin in a week. As per a recent filing with the Securities and Exchange Commission, this latest purchase brings Strategy’s total bitcoin holdings to 815,061 BTC, representing approximately 3.88% of the total supply of 21 million bitcoins and valued at around $65 billion. The only known larger holder of bitcoin is believed to be Satoshi Nakamoto, the cryptocurrency’s mysterious founder who vanished from the public eye 15 years ago.
This latest influx of bitcoin was not financed through the issuance of common shares or convertible debt, but predominantly through a high-yield perpetual preferred stock known as “Stretch,” which has been issued under the symbol STRC. Strategy’s chairman, Michael Saylor, has positioned Stretch as a key element in the company’s ongoing bitcoin acquisition strategy.
From 2020 to 2024, Strategy funded its bitcoin purchases through convertible notes and common stock. This approach proved effective while bitcoin prices were climbing, allowing Saylor to continuously issue more convertible bonds and stock to investors who anticipated future gains. At times, the company’s shares traded at significantly higher valuations than the actual bitcoin on its balance sheet. However, the model faced challenges as bitcoin prices fell in early 2025, causing convertible bondholders to seek income protection while common shareholders dealt with significant dilution. The decline in the stock premium led Saylor to pivot towards preferred-stock offerings. Among these, STRC has quickly gained traction, designed to be a stable, income-generating asset for investors.
Launched at a price of $90 with a 9% coupon, STRC is structured to trade around its $100 par value and offers a monthly dividend. The mechanism is intended to maintain balance: if the shares dip below par, Strategy can increase the dividend to attract buyers; if they rise above $100, the company can issue more shares to offset this. Currently yielding 11.5%, and having rarely dipped below $95 in nine months, STRC has emerged as a favorite among retail and institutional investors.
Saylor refers to Stretch as their “iPhone moment,” expressing optimism that a stable and liquid preferred stock can unlock more capital than previous fundraising mechanisms. Its market capitalization has skyrocketed to $8.5 billion since its $2.5 billion IPO, significantly outpacing Strategy’s other preferred securities. Trading volume for STRC has also been impressive, rivaling the daily volumes of major financial institutions, with April 13 seeing more than $1.1 billion exchanged.
Financial advisors are increasingly turning to STRC to meet the needs of wealthy clients seeking high-yield investments. Analysts describe it as a yield enhancement product, contrasting it with the underwhelming returns from traditional bond portfolios. Strategy has also gained traction among mutual fund and ETF managers, with prominent financial entities like BlackRock and Fidelity acquiring substantial amounts of the preferred stock.
However, there are concerns regarding the long-term viability of the system. With bitcoin prices down by 16% over the past year, Strategy is currently paying approximately $85 million in monthly dividends to Stretch holders without divesting bitcoin. The dividends are funded primarily by issuing shares, which some critics liken to a Ponzi scheme, albeit legally transparent.
Analysts stress that this ongoing strategy allows the company to raise capital without significantly impacting common share count, crucial for preserving the perceived value of its underlying bitcoin holdings. Nonetheless, this dependence on external capital raises questions about the sustainability of the model, particularly given Strategy’s ongoing financial obligations, which amount to over $1.2 billion yearly in interest and dividends.
Despite these challenges, Saylor remains unabashedly confident in his strategy. He proposed an increase in the frequency of dividend payments for STRC from monthly to semi-monthly, which, if successful, would make STRC distinct as the only preferred stock offering payments twice a month. If approved, the first new payment would be issued on July 15, further appealing to retail investors eager for immediate returns.
As the dynamics of the market continue to evolve, the future of Strategy’s unique financing approach will be closely watched by both investors and analysts alike.
