The world’s largest corporate Bitcoin holder, MicroStrategy (Strategy), CEO announced plans to issue more perpetual preferred shares to provide investors with a tool that offers “existing digital capital positions while avoiding volatility.” But how long can this financial magic last?
(Background recap: Bitcoin rebounds to $65,000, sleeping whales buy the dip, Japan’s MicroStrategy Metaplanet: embracing BTC with unchanged goals)
(Additional context: MicroStrategy’s BTC floating unrealized losses surpass $10 billion! The worst financial report in Strategy’s history with stock plunging 17% overnight)
Table of Contents
- The bet of 714,644 Bitcoins
- The limits of financial engineering
- Innovation or risk shifting?
MicroStrategy CEO Phong Le recently told Bloomberg that the company will issue more perpetual preferred shares to ease investor concerns over sharp stock price fluctuations.
We know Strategy is the publicly traded company holding the most Bitcoin globally, with its stock price highly correlated to Bitcoin. Its issued perpetual preferred share product is called “Stretch” (ticker STRC). Its mechanism: the dividend rate resets monthly, currently at 11.25%, designed to keep the stock price stable near a face value of $100.
This is a hybrid security: it has stock-like features (perpetual, no maturity date) and bond-like features (fixed dividends, price anchoring). For investors wanting Bitcoin exposure but unable to tolerate MSTR’s stock dropping from $200 to $100, STRC offers a “buffer zone.”
Data shows that since its launch last July, STRC has contributed over 27,000 BTC worth of funding to Strategy’s Bitcoin purchases. This makes it Michael Saylor’s primary fundraising tool.
The bet of 714,644 Bitcoins
According to the latest data, Strategy holds 714,644 Bitcoins, valued at approximately $48.4 billion, with an average cost basis of about $76,506 per BTC. Amid a significant Bitcoin correction, the current unrealized loss is nearly $6.2 billion.
To reassure the market, Executive Chairman Saylor repeatedly emphasized that concerns about “Bitcoin declines forcing the company to sell holdings” are “groundless.” He pointed out that the company’s debt is unsecured and long-term, with most obligations not due until 2027-2028, so there’s no risk of margin calls.
This logic is technically sound, but he did not delve into a potential issue: if Bitcoin remains below cost basis long-term, how will the company continue issuing new shares or preferred stock to buy more Bitcoin?
The limits of financial engineering
Strategy’s business model is essentially an arbitrage: using the valuation premium in the stock market to buy spot Bitcoin. As long as investors are willing to pay above net asset value for “Bitcoin positions,” this machine can keep running.
Perpetual preferred shares are a new component of this machine. They attract a different set of investors—those seeking fixed income rather than unlimited upside potential. This broadens Strategy’s funding sources and reduces dilution pressure on common shares.
But this model carries clear risks. When Bitcoin’s price drops sharply (for example, below $70,000 currently), STRC’s attractiveness depends on whether investors believe that an 11.25% dividend yield sufficiently compensates for the risk. If confidence wanes, Strategy loses an important fundraising channel.
Innovation or risk shifting?
From one perspective, Strategy is doing what traditional financial institutions have done for decades: creating products with different risk levels to meet diverse investor preferences. There’s nothing new there.
But from another angle, it’s using financial engineering to mask a fundamental issue: Bitcoin’s volatility doesn’t disappear just because you package it as preferred shares. The risk is merely shifted—from those who can tolerate volatility to those who think they’re buying a “stable” product.
Saylor’s vision is to make Strategy an “on-ramp” to Bitcoin, but in times of panic, everyone will want to exit simultaneously. MicroStrategy has already demonstrated the long-term gains of holding through the last cycle; with the current bear market’s end still unclear, investors need to exercise stricter risk controls.
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