MicroStrategy’s STRC Drops Below $100, Halts Par Issuance

MicroStrategy’s Variable Rate Series A Perpetual Stretch Preferred Stock, known as STRC, traded below its $100 par value after the company sold 32 Bitcoin between May 26 and May 31 to fund preferred dividends. The sale prevented MicroStrategy from issuing STRC at par while the preferred shares remained under $100.

The 32-BTC sale was the company’s first Bitcoin sale since 2022. MicroStrategy reported holding 843,706 BTC as of its latest filings.

STRC carries an 11.50% annual dividend and is structured to trade around $100 so the company can issue new shares at par and use the proceeds to buy additional Bitcoin. During the most recent reporting period the company did not issue any new STRC while the shares were below par.

Instead of raising cash via STRC, MicroStrategy sold 801,994 shares of its common stock, MSTR, in the same week, generating about $128 million in net proceeds. Filings also show the company held roughly $900 million in cash set aside to cover preferred dividends and interest obligations.

The firm kept the STRC dividend rate at 11.50% for June and maintains shelf registration that could allow billions of dollars of STRC issuance if the share price returns to par. The company raised the STRC dividend earlier this year.

Bitcoin traded near $67,252 on June 3, compared with MicroStrategy’s reported average purchase price of $75,702, leaving the company’s holdings below their average cost on paper.

A user posted, “Below $100, STRC can’t fund new BTC purchases. MSTR is also depressed. That leaves one option to cover $1.7B/year in obligations: Sell Bitcoin.” An analyst wrote, “THE STRC PARTY IS OVER … It wont peg to $100 and therefore Saylor wont be able to use it to raise. It may not peg for a while… This is one of the reasons Bitcoin is dumping.”

Company filings list the paths available to cover dividend and interest obligations: issue STRC at par if the price rises above $100, sell common stock, draw on cash reserves, or sell Bitcoin. The timing and mix of those actions will depend on the STRC market price, cash balances and Bitcoin market levels.