Key Takeaways
- Strategy seeks shareholder authorization for daily dividend distributions on four preferred securities: STRF, STRC, STRK, and STRD.
- This modification affects only distribution frequencyādividend yields and aggregate payouts remain unchanged.
- The shareholder vote takes place during a virtual session scheduled for Oct. 28.
- STRC shares have persistently traded beneath their $100 reference price since May, reaching a low of $71 in June.
- CEO Phong Le attributed the decline to unanticipated leveraged trading activity surrounding STRC.
Strategy aims to distribute returns to investors on a daily basis. The Bitcoin-focused treasury corporation is requesting approval from shareholders to implement daily dividends for its quartet of U.S.-traded preferred securities. Shares of MSTR concluded trading at $158.61 and hovered near $158 during Friday’s session, declining 2.15% from the previous close.
The initiative encompasses STRF, STRC, STRK, and STRD. The revised framework would designate each calendar day as a dividend record date, with distributions processed on the following business day.
The fundamental dividend percentages and cumulative payment obligations remain intact. This adjustment exclusively concerns payment scheduling. Investors will cast their votes on this measure during a virtual special assembly on Oct. 28.
STRC would be the initial security to transition. Upon approval, its inaugural daily distribution would occur on Nov. 2. STRF, STRK, and STRD would implement the change in January, with debut payments anticipated on Jan. 4.
The Challenge Facing STRC
STRC has experienced significant turbulence over recent months. Despite offering a 12% annualized dividend yield, the security has failed to regain its $100 reference valuation since May.
The preferred share reached its nadir at $71.25 during June amid widespread Bitcoin market weakness. While it has since rebounded to approximately $98.65, the final climb to $100 has remained elusive.
Strategy CEO Phong Le addressed the price pressure during an appearance on Natalie Brunell’s Coin Stories podcast this week. He revealed that leveraged positions in STRC exceeded the company’s projections.
Market participants had been securing low-cost loans collateralized by Bitcoin to purchase STRC, capturing the difference between borrowing costs and the dividend return. When Bitcoin prices contracted, these traders faced margin requirements forcing liquidation of STRC positions or additional collateral deposits.
“We did not expect the amount of leverage that came into the system,” Le said. “And so that’s a lesson learned, next time around.”
Adopting Strive’s Approach
Strategy isn’t pioneering this strategy. Strive implemented the model in May for its SATA preferred security, establishing itself as the inaugural publicly traded entity to distribute dividends daily.
Strive’s SATA distributes returns each business day at a 13% annual yield and has maintained greater price stability near $100 compared to STRC. Strategy’s proposal contains a subtle distinction: it recognizes every calendar day, including weekends and holidays, as a record date instead of limiting recognition to business days.
Strive maintains holdings of 26,355 Bitcoin. Strategy commands a substantially larger position: 846,000 BTC, purchased for $63.80 billion at a mean cost of $75,416 per coin.
Strategy has additionally executed buybacks of its own preferred securities to bolster market pricing. The corporation has allocated approximately $1 billion from a $2 billion repurchase authorization, including $174 million in STRC shares acquired during the week concluded Sept. 20.
Le indicated the company now prioritizes strengthening its dollar reserves while continuing its commitment to repurchasing STRC when trading occurs below $100. He also emphasized attracting more long-duration, institutional participants to the investor base.
Bitcoin was changing hands around $83,600 on Friday. The proposed modifications to Strategy’s preferred stock documentation would become operative following submission with Delaware state authorities.
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