Strategy's STRC slips below $99 as Strive captures investor attention

STRC has struggled to maintain its $100 target price, while Strategy's reduced cash reserves and dividend obligations are drawing increased investor attention.

What to know:

• STRC fell to $97.11 before recovering to close at $98.57, raising questions about Strategy's ability to continue using the preferred security as an efficient capital-raising vehicle through ATM issuance.
• Following the $1.5 billion repurchase of convertible debt, Strategy's cash reserves have fallen to roughly $871 million, covering only about six months of its estimated $1.7 billion annual preferred dividend obligations.
• Strive's perpetual preferred security, SATA, has remained closely tied to its $100 par value, supported by a roughly 13% dividend yield and the company's planned introduction of daily dividend payments.

Strategy's perpetual preferred security, Stretch (STRC), fell as low as $97.11 on Thursday as bitcoin BTC$73,623.66 slipped to the $73,000 mark.

STRC tends to face selling pressure during bitcoin drawdowns and in the days immediately following its ex-dividend date, as seen on Nov. 20 and Feb. 5. The ex-dividend effect typically results in a price adjustment reflecting the value of the dividend, while periods of bitcoin weakness can reduce investor appetite for Strategy-related securities. Together, these factors have historically created short-term pressure on STRC's market price.

The company has structured STRC to trade near its $100 par value, as maintaining that level enables Strategy to continue issuing shares through its at-the-market (ATM) program and raise additional capital efficiently.

Strategy repurchased $1.5 billion of its 0% convertible senior notes due 2029 recently, reducing its overall debt burden. However, the buyback was funded using cash from the company's U.S. dollar reserve. Strategy's cash balance declined from approximately $2.25 billion to $871 million as a result.

Based on the company's current annual preferred dividend obligations of roughly $1.7 billion, the remaining cash reserve now provides only about six months of coverage but was initially implemented to cover the dividend obligations for 24 months.

Executive Chairman Michael Saylor discussed several potential sources of capital that could be used to meet dividend obligations and support the balance sheet in a recent interview with CoinDesk Senior Analyst James Van Straten. These include selling bitcoin, issuing additional MSTR equity when the stock trades above a 1.22x multiple to net asset value (NAV), or raising capital through STRC issuance. Saylor emphasized that management evaluates these decisions through the lens of bitcoin per share, prioritizing actions that are accretive to shareholders.

Competing bitcoin treasury company Strive Asset Management (ASST) has taken a different approach. The company recently announced daily dividend payments for its perpetual preferred security, SATA. For the past two weeks, SATA has remained tightly anchored around its $100 par value while offering a dividend yield of approximately 13%, even during bitcoin's decline.

Although the daily dividend mechanism has not yet been implemented, investors may view it as a stabilizing feature that helps keep the security trading close to par.

Strive has also eliminated all debt inherited through its acquisition of Semler Scientific, a balance-sheet strategy that mirrors the direction Strategy appears to be pursuing through its recent debt repurchases.

The market performance gap between the two companies has been notable. Over the past three months, Strive shares have gained approximately 110%, compared with a 12% rise in MSTR and an 8% increase in bitcoin. This divergence suggests investors may be rewarding Strive's cleaner balance sheet and higher-yielding preferred structure.

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